CONTRIBUTORS
Jake Williams
Global Co-Head of Alternatives
Wealth Management Product
Arthur Thomson
Global Alternatives Product Strategy Specialist
Peter Blue, CFA, CAIA, FRM
Head of Alternative Solutions
At Franklin Templeton, we are committed to providing investors with timely insights and industry perspectives on private markets. As the industry evolves rapidly, this series brings clarity to the key trends shaping its future”
George Stephan
COO - Global Wealth Management Alternatives
With the rise of evergreen vehicles, investors and advisors have more flexibility in building private asset exposure. Closed-ended / drawdown funds have long been the primary route, requiring capital commitments and staged drawdowns. In contrast, evergreen funds offer continuous subscriptions and redemptions, providing immediate exposure and more flexible liquidity management.
Each structure comes with trade-offs, from operational complexity to investment pacing and return expectations. While they may require greater operational effort, closed-ended / drawdown funds can provide pure private asset exposure without the need for liquid assets.
In this paper from our Private Markets Insights series, we compare the merits of both fund types and explore how investors can use a blended approach to balance efficiency, liquidity, and portfolio growth.
Conclusion and takeaways
A combined allocation to both evergreen and closed-ended / drawdown vehicles can offer an effective approach to investing in private assets, balancing operational efficiency and investment flexibility. For more sophisticated investors, closed-ended / drawdown funds provide pure private asset exposure without the need for liquid assets. While they may require greater operational effort, once the initial onboarding and due diligence are completed, this burden is significantly reduced for the remainder of each vintage.
Evergreen funds add flexibility, offering immediate exposure to a fully ramped portfolio, and allowing for periodic subscriptions and redemptions. This structure supports efficient liquidity and capital management, helping investors and advisors with portfolio re-balancing, re-investing distributions from closed-ended / drawdown funds or funding capital calls. Ultimately, a combined allocation to evergreen and closed-ended / drawdown funds can help investors efficiently achieve their investment objectives while maintaining flexibility within their private assets portfolio. The ideal mix will depend on an investor’s specific needs, as well as the characteristics of the targeted private asset class, including return expectations and distribution profile.
WHAT ARE THE RISKS?
All investments involve risks, including the possible loss of principal.
Investments in alternative investment strategies are complex and speculative investments, entail significant risk and should not be considered a complete investment program. Depending on the product invested in, an investment in alternative investments may provide for only limited liquidity and is suitable only for persons who can afford to lose the entire amount of their investment. An investment strategy focused primarily on privately held companies presents certain challenges and involves incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity.
An investment strategy focused primarily on privately held assets presents certain challenges and involves incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies. Additionally, an investment in private assets or vehicles which invest in them, should be viewed as illiquid and may require a long-term commitment with no certainty of return. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor’s ability to dispose of them at a favorable time or price.