Amid the surge in evergreen fundraising in Australia, HarbourVest Partners has outlined five factors local investors should consider before choosing an evergreen investment.
The advent of evergreen funds has paved the way for more investors than ever to gain access to private markets, offering flexible, continuous exposure to asset classes such as private equity, private credit and infrastructure. Many investment firms have launched evergreen funds in Australia in recent years, raising hundreds of millions of dollars, yet investors should be aware that not all evergreen funds are created equal.
Amid the surge in evergreen fundraising in Australia following strong local demand, HarbourVest previously raised concerns about the ‘Seven Sins’ of evergreen investing; namely greed (excessive fundraising), sloth (inefficient deployment and cash drag), envy (chasing secondary discounts), wrath (improper use of leverage), lust (valuation distortion), gluttony (inadequate diversification), and pride (overconfidence in fund management).
For investors considering evergreen funds, these risks warrant careful consideration. Recent disruptions in private credit, and the AI-driven repricing in software funds, have jolted markets and brought the vulnerabilities of evergreen funds into sharper focus. In late 2025 and early 2026, many private credit managers faced redemptions for the first time, as flocks of investors sought to limit exposure.
As evergreen vehicles face turbulence from geopolitical issues, the impact of AI, and concerns about private credit, we identify five key areas Australian investors should pay close attention to as they conduct due diligence on evergreen investments:
- Investor diversification
We have previously defined ‘gluttony’ as over-concentration on one sector, region or vintage, yet this also extends to the investor base of evergreen vehicles. Recent months have seen large withdrawals sparked by one major wealth platform shifting its position.
Intentional investor mix – diversification by geography, channel, and vintage, for example – also plays an important role. Meaningful institutional participation in evergreens can create greater structural stability, especially when the institutional investors agree to lock up their capital for a set period of time.
Evergreen fund managers need broad-based, diversified redemption patterns and should avoid being overly reliant on any single source. Investors conducting due diligence should always ask, ‘What does your manager’s top-five distributor and anchor investor concentration look like as a share of AUM?’
- Valuation stress testing
Frequent NAV calculations create inherent pressure around valuations in evergreen vehicles, and the independent oversight of NAV calculations is essential. In recent months, the ‘SaaSpocalypse’ has placed the spotlight on valuations. Software and technology borrowers constitute a meaningful share of private credit and BDC portfolios, and as they are mostly private positions, they are valued by managers, not by markets. This raises the question, ‘Are private marks keeping pace with the shifting landscape?’
Software exposure runs through the private markets, including our own funds. As such, investors should consider if fund managers’ valuation processes are governed independently, stress-tested against fast-paced sector-level disruption, and updated with the rigour the current environment demands.
- Liquidity
A common misunderstanding about evergreen funds stems from terminology, with words like “semi-liquid” often ascribed to the vehicles. This sets mistaken expectations that do not align with reality. Evergreen funds are not an attempt to turn private markets into a trading vehicle. They are not liquid like an ETF. They are not even semi-liquid. They provide periodic access to liquidity, but they do not guarantee it.
Redemptions are subject to factors such as available cash, portfolio conditions, exit activity, and fund limits. Evergreen funds are still designed to be held for the long-term — liquidity is part of the design, but not the main objective. Investors should keep this in mind and understand that investing in private markets is inherently long term and requires patience to create value.
- Liquidity infrastructure
Fund gates often receive negative attention during periods of market stress, yet they are one of the most important investor protections in an evergreen fund. They exist to prevent redeeming investors from forcing asset sales that could harm the other investors. They ensure fairness and alignment across investor cohorts, enabling a manager to fulfil its fiduciary duty. Recent examples of gates being activated during periods of elevated outflows show the mechanism working as intended.
Rather than focusing solely on gates, investors should look to the broader question of whether fund managers have the necessary liquidity — reserves, credit facilities, and natural cash generation — to absorb second and third redemption cycles without forced selling or portfolio distortion. Have they stress-tested for a period of sustained outflows?
- Fundraising discipline
In many ways, the evergreen space has been a victim of its own success: many of the vehicles navigating heightened redemption activity are those that scaled most aggressively through 2022-2024. The sheer pace of fundraising created conditions which have now become visible, such as deployment pressure, valuation complexity at scale, and capital growth which has outpaced the diversification of the investor base.
Investors should consider a firm’s fundraising discipline — matching the pace of capital raising to organic deployment and investor base diversification — to determine its resilience.
Transparency and education are key
The growth of evergreen as a product reflects increased investor demand, and these vehicles will continue to democratise access to private markets, with AUM forecast to hit US$1 trillion by 2029. Current conditions have stress-tested the evergreen space, but the lessons learned will leave the market better positioned to weather future storms.
More robust distributor diversification, more rigorous valuation governance, and more honest liquidity stress testing will both improve the sector and benefit investors. At HarbourVest, we continue to apply these lessons to our business in real time, and believe Australian investors should take them into consideration as they contemplate evergreen allocations and fund manager selection.
Going forward, it is crucial that fund managers are honest and up front about what evergreen funds are designed to do, how liquidity actually works, and why certain guardrails exist. Investors, meanwhile, should take time to understand how evergreen funds work, conduct thorough due diligence on the five themes mentioned in this article, and determine whether these long-term investment vehicles align with their goals and liquidity needs.
By Warwick Mancini, managing director at HarbourVest Partners Australia
