By Georgina Tzanetos, CAIA Association
Every so often, the industry builds a product that solves a real problem.
Evergreen funds can safely be placed as such. For decades, access to private markets meant locking up capital for ten years or more. Evergreen structures changed that, as investors could now subscribe at NAV, skip the capital calls, and request redemptions on a regular schedule. For wealth clients who had never been able to hold private equity, private credit, or real estate in a meaningful way, that was considered a breakthrough.
And the structure works. These funds do what their documents say they will do.
The trouble starts somewhere between the documents and the client.
Read an offering document and you will find a sentence like this: the fund intends to repurchase up to 5% of shares each quarter, subject to board approval. Follow that sentence down the distribution chain and watch what happens to it. In a wholesaler’s pitch, it may become “quarterly liquidity.” In a client meeting, it may become “you can get out when you need to.” Each version is a little shorter than the last, and a little less accurate.
At CAIA, we kept coming back to that gap. When we published The World Rewired earlier this year, semi-liquid structures surfaced as one of the defining product conversations of the decade. Much of that discussion centered on mechanics: redemption queues, valuation policies, and how to run these vehicles at scale. We wanted to examine the part of the system that mechanics alone cannot fix: how the product is understood by the time it reaches the investor.
That work became our latest paper, The Window Narrows: Evergreen Funds and the Choice Before the Industry.
A Category Growing Faster Than Its Explanation
U.S. evergreen funds held $534.6 billion in net assets at the end of 2025, across 548 funds. Ninety-eight of those funds launched in 2025 alone, and projections put the universe at $1.1 trillion by 2029.
Most of that capital arrived during benign conditions. Now however, growth has outpaced understanding, and much of the category has never been through a full stress cycle. It could be argued that a structure that has yet to be tested has yet to be fully proven.
Where the Exposure Sits
The paper’s central argument is that the risk lives in the distribution chain. A product moves from provider to wholesaler to advisor to client, and each handoff simplifies the liquidity terms a little more. Nobody has to act in bad faith per se for this to happen. Compression can happen innocently when complex terms travel through busy people. It also just so happens that it rarely works against the sale.
By the end of this busy chain, an investor can hold a promise the fund never made. When redemption requests exceed the cap, the fund behaves exactly as designed. The investor though experiences it as a broken promise.
We Have Seen This Before
The paper traces three earlier episodes: non-traded REITs, the 2008 hedge fund gates, and the Reserve Primary Fund. They involved different products in different decades, and each followed a similar five-stage sequence. A sound structure emerges → Distribution oversimplifies it → Investors act on an incomplete picture → A stress event exposes the gap → Reform follows.
Evergreen funds today sit somewhere between stages two and three, with the fifth stage still open. Reform will be written either way, but the question is whether it gets written in advance, by people who understand the product, or afterward, by people who do not.
Start With the Language
The easiest, and plausibly the easiest, place to intervene is vocabulary. “Semi-liquid” invites the listener to hear “mostly liquid.” The paper proposes retiring it in favor of “capped liquidity,” a term that names the constraint up front and still holds when a redemption queue forms. Another reason we suggest this terminology is for its comparative resilience against controversy. A headline that reads “Redemption Requests Overwhelm Semi-Liquid Fund” is controversial whereas “Capped liquidity Fund Applies Its Limitations” is hardly a headline at all.
Four Roles, One Thread
The paper closes with a practitioner framework built around the four roles that hold a decision in the chain. The connecting thread is discretion.
Product providers hold discretion over where the product travels, which means distributing by client fit and stress testing against correlated redemptions. Wholesalers hold discretion over what a practice is taught, which means covering queue mechanics and proration before the first ticket is written. Advisors hold discretion over what a client understands, which means walking through the cap, proration, and full-exit arithmetic before subscription. Finally, industry bodies hold discretion over what competence means, which means setting a technical baseline and a shared vocabulary the whole chain can use.
Now What?
The Window Narrows makes an argument, and it is a hopeful one. Conditions are calm, and the queues are currently manageable. The industry still has time to write its own reform through clearer language, better education, and distribution decisions made with the end investor in mind.
However, that window will not stay open indefinitely. History has taught us well that investor behavior overrides document disclosures. All too often, investor perception tends to be more important than stated disclosure logic, which leads to breaks in the distribution chain that are to no fault of any one individual, but a responsibility that falls on the whole. Every quarter of growth adds investors to the chain, and every new investor makes the eventual correction harder to write well.
The window is open. For now. Let’s help rewrite the rules ourselves before they are written for us.
