For about three years, the story of evergreen private market funds ran at one speed. Up. New launches, fat inflows, and a pitch to everyday investors that you could own private credit or private equity without waiting a decade to see your money. Then came a quarter that Morningstar and PitchBook summed up in one line: “Redemptions were the story of the quarter for evergreen funds.” That sentence is worth sitting with, because it tells you what these funds are when the mood changes.
A boom that caught its breath
The headline number still looks enormous. Morningstar and PitchBook’s Q2 2026 US Evergreen Fund Landscape puts net assets at $607.2 billion across 567 active funds. But read the report closely and a more interesting picture appears. Last quarter the same researchers had reported $534.6 billion for the end of 2025. This quarter they restated that figure to $590.8 billion, citing newly added funds that sit outside the 1940 Act framework, delayed reporting that caught up, and wider coverage.
So what does growth look like against the corrected base? By simple math on the report’s own figures, assets rose about 2.8% in the first quarter from the restated 2025 level. For all of 2025, the same math gives roughly 35%. The fund count tells a similar story, with 567 funds against 552, an increase of about 2.7%. Those are our calculations, not the report’s headline claims, and the coverage changes mean the comparison is rough. The direction, though, is hard to miss. The sprint became a jog.
It has not reversed. Morningstar’s September 25 update on the category put evergreen assets at $653.2 billion, up about 8.7% from a year earlier versus roughly 35% the year before. Slower, not shrinking. That distinction matters, and so does the question of why the pace changed.
What the 5% cap actually did
Most of the answer sits in how these funds handle exits. Interval funds and business development companies, the two structures that dominate this market, generally limit quarterly repurchases to about 5% of net assets. Interval funds are required under SEC Rule 23c-3 to offer to repurchase between 5% and 25% of shares, according to a CAIA Association paper on the category. BDC boards, by contrast, have discretion over whether to pay at all.
In the early months of 2026, requests ran well past that 5% mark at several large private credit funds. WealthManagement reported in March that Cliffwater’s $33 billion Corporate Lending Fund received redemption requests on 14% of its shares in the first quarter, double its 7% quarterly cap. Blackstone lifted the quarterly limit on its flagship private credit BDC from 5% to 7%, against requests of about 7.9% of shares, and covered the rest with roughly $400 million from the firm and its employees. The Morningstar and PitchBook report adds that net assets in the Blackstone Private Credit Fund fell by $2.6 billion between the fourth quarter of 2025 and the first quarter of 2026.
Think about what a cap that low against requests that high means for an individual investor. Many people who asked to leave got only part of what they asked for. Nobody broke a rule. The fund did exactly what its documents said it could do. The report itself says the typical 5% repurchase caps are “working as designed.” Both things can be true, and the gap between them is where retail investors tend to get surprised.
There is some encouraging news in the latest round. Morningstar and PitchBook note that second quarter repurchase demand eased at several of the largest funds compared with the first quarter. Pressure appears to have eased. Whether it stays eased is a different question, and nobody can answer it from a report.
The word “semiliquid” is doing a lot of work
Carlyle chief executive Harvey Schwartz said on a January analyst call that “the industry did itself a bit of a disservice calling the vehicles semiliquid.” It is a striking thing for the head of a major alternatives manager to say, and it points at a real problem of expectations. A retail investor who hears the word liquid, even with a qualifier attached, may reasonably picture a mutual fund. These products are nothing like that.
The harder cases show the difference. WealthManagement reported that Blue Owl stopped quarterly redemptions on one of its non-traded BDCs in February, replacing them with return of capital distributions funded in part by asset sales. Whatever one thinks of that decision, it shows that the exit door in a BDC is a board decision, not a promise.
Costs are part of this conversation, too. The CAIA paper, citing Morningstar research from December 2025, notes that median expense ratios across the evergreen universe sit above 3%. Performance has also cooled from the strong run the category enjoyed. The Morningstar PitchBook US Evergreen Fund Index returned 1.6% in the first four months of 2026, per the CAIA paper, against 7.4% for 2025. The report shows the direct lending index at 0.9% for the same four-month stretch through April 30. A few months prove very little, and anyone drawing conclusions from them is overreaching. But they are a reminder that the smooth, low-volatility reputation of these funds rests partly on how they value their holdings, not only on how those holdings behave.
Where the money is drifting
Direct lending remains the giant of the category, at $236.7 billion in net assets at year-end 2025, roughly 39% of the total. Yet Morningstar’s September update says the strategy has pulled back slightly even after tripling in size since 2022. Meanwhile the growth has found other homes. Private equity evergreen funds now hold $107.9 billion in net assets, which Morningstar says is double their level at the end of 2024. Venture capital evergreen vehicles have grown from roughly $3 billion to more than $20 billion.
That shift deserves a skeptical eye rather than applause. The funds that attracted the most attention during the redemption wave were credit funds, and credit funds at least own assets that mature and pay interest. Private equity and venture holdings do not repay on a schedule. The CAIA paper, citing Morningstar, says evergreen private equity funds hold about 15% of their portfolios in liquid assets on average, while private credit funds hold roughly half that share. Those buffers are how a fund meets repurchase requests without selling its best holdings at a bad moment. The newer, faster-growing corners of the market have not yet lived through a rush for the exits of the kind private credit just experienced.
A caution on sources is fair here. The CAIA paper is an advocacy piece from an industry education body, and the figures it cites should be read as the claims of the underlying researchers, not as independent findings. The same goes for any fund company’s marketing.
What a careful investor takes from this
None of this says evergreen funds are broken. The report that documented the redemption pressure also found that maturities and income covered requests without forced selling, and that the structures behaved as designed. That is a real test passed. The point is narrower and more practical. A product can behave exactly as its documents promise and still disappoint someone who never read them.
So the useful questions are dull ones. What is the repurchase cap, and is it a requirement or a board decision? What happens if requests are double the limit, and who gets paid first? How much of the portfolio could be sold quickly, and at what discount? What do the total fees add up to? How often is the portfolio valued, and by whom? The answers sit in the prospectus, and a fund that makes them hard to find has told you something already.
The evergreen boom is not over. It has simply stopped being a one-way story, which is probably the healthiest thing that could have happened to it. Investors who treat the next chapter as a test of the terms, rather than a test of the marketing, will be reading the right pages.
This article is written for educational and informational purposes only and does not constitute financial or legal advice. The views and analytical frameworks presented draw on publicly available information and reported commentary from industry participants. Readers are encouraged to consult primary sources and form their own informed views on these complex topics.
