Evergreen funds making inroads into Asia: HarbourVest

[SINGAPORE] Evergreen funds have come into focus in Asia in recent years, offering investors a less-complicated means of maintaining continuous exposure to private-market assets than traditional closed-end funds.

“Investing (through) single closed-end private equity (PE) funds could mean as many as 80 separate cash transactions, and these add up with multiple fund commitments – which can be a huge administrative burden,” Craig MacDonald, managing director at PE firm HarbourVest, told The Business Times.

Evergreen funds generally acquire “secondaries”. These are alternative assets or portfolios that an original limited partner or general partner is looking to offload before their closed-end funds mature. There is currently more demand for secondary capital than supply.

“If there’s a shortage of capital, then that’s always going to favour the buyer. It’s certainly something we’ve noted and benefited from, and expect to (see) continue for the foreseeable future,” said MacDonald.

Evergreen funds allow access to closed-end funds later in their fund tenure, allowing investors to reap the returns that come after the J-curve. The J-curve refers to the initial loss experienced by PE investors after their initial investment, before the fund starts getting returns from its investments.

Interest seen among private wealth investors

Asia has some spots of activity, even though volumes are still nowhere near that of Europe or the US, noted MacDonald. “That doesn’t mean the market here doesn’t have the same long-term opportunity, and I would certainly say that some of the most exciting sector transactions have been done here in Asia.”

Among the sectors that have piqued investor interest in Asia are industrials, consumer and education, he added.

The managing director said that HarbourVest has seen particularly good traction among private wealth investors, and that it currently has 25 people in its evergreen fund team.

However, he warned that investors ought to carefully consider the liquidity characteristics of these structures.

SEE ALSO

Private credit not in a bubble: Hamilton Lane 2026 market overview

Private equity turns to continuation funds, secondary buyouts as alternative to traditional exits: Morrison Foerster

NUS selling US$500 million of PE, property funds to manage liquidity, China exposure

Liquidity has been a big concern among investors since US private-credit funds clamped down on redemptions, relying on the liquidity gates referenced in the fund documents.

“While liquidity is not guaranteed in evergreen funds, the structures, the experience, the underlying asset classes themselves, and how these boards have been constructed should give investors confidence,” said MacDonald.

Then there is the importance of institutional capital within evergreen funds. Institutional investors have longer investment horizons than individual investors, and are the key to providing the long-term capital needed to anchor these funds.

“I think an institutional investor is actually quite surprised about some of the benefits they see in evergreen funds, (such as) the ability to minimise their own workload and opportunistically allocate and control their percentage of allocation to PE through evergreen funds,” noted MacDonald.