The burgeoning popularity of evergreen funds, a staple in the alternative investment landscape, has simultaneously illuminated the inherent challenges they pose for both financial advisors and the investors they serve. Over the past twelve months, a growing concern surrounding the underlying assets within private credit Business Development Companies (BDCs) in late 2025 precipitated a wave of redemption requests that frequently outpaced the stipulated quarterly caps, typically set at 5% of Net Asset Value (NAV). This situation has spurred innovative solutions and highlighted the delicate balance between investor demand for accessible alternative assets and the structural illiquidity of these funds.
The Redemption Pressures on Evergreen Funds
The recent period has been marked by significant strain on the semi-liquid structures of evergreen funds. When worries about the performance of underlying assets in private credit BDCs surfaced in late 2025, a substantial number of fund managers found themselves grappling with redemption requests that exceeded their stated quarterly limits. These limits are a crucial mechanism designed to manage the liquidity of funds that invest in inherently illiquid assets like private debt and equity.
In response to this mounting pressure, fund managers adopted varied strategies. Some opted to temporarily accommodate redemption levels that surpassed their established caps, seeking to appease investors and maintain market confidence. A more decisive measure was taken by Blue Owl Corp., which announced a halt to its quarterly redemptions. Instead, the company transitioned to periodic distributions, funded through the liquidation of assets and the repayment of loans within its portfolios. While the intensity of redemption requests has since subsided, this episode underscored the fundamental tension: investors increasingly desire the continuous access offered by evergreen funds, yet the underlying assets often necessitate a longer investment horizon and limited liquidity. Despite these challenges, private placement BDCs, as a collective, have largely managed to meet most redemption requests. However, the experience has undeniably exposed the limitations of the semi-liquid label when faced with significant investor outflow.
Existing and Emerging Secondary Liquidity Mechanisms
The concept of providing investors with avenues to exit evergreen funds outside of scheduled redemption periods is not entirely new. Similar challenges have been addressed within the realm of Non-Traded Real Estate Investment Trusts (REITs), which experienced heightened redemption requests in 2023. Platforms such as LODAS Markets (formerly Realto Inc.) emerged to facilitate secondary liquidity events for investors in non-traded REITs, enabling them to trade their stakes on a secondary market.
Beyond these structured platforms, opportunistic investors have also played a role. Private investment firms like Cox Capital Partners and Saba Capital Management have become known for making unsolicited offers to acquire oversubscribed shares in semi-liquid vehicles facing redemption issues. These offers typically come with a discount to NAV. However, industry analysts generally view these discounts as too substantial for most investors to consider the deals attractive, especially when compared to the prospect of waiting for scheduled redemptions at NAV. For instance, an unsolicited tender offer in March for 6.9% of shares in Blue Owl Capital Corporation II (OBDC II), a non-traded private credit BDC, proposed a steep 34.9% discount. Similar offers for shares in non-traded private credit BDCs managed by prominent firms such as HPS Investment Partners, Apollo Global Management, and Ares Management, which averaged a 26% discount, garnered limited investor interest.
Michael S. Covello, executive managing director at research firm Robert A. Stanger & Co., commented on this phenomenon, stating, "When investors can get redemptions at NAV, they generally do not view liquidity with large discounts to NAV as attractive versus waiting. Even in periods of heightened redemptions, they are getting redeemed, just not in full."
More integrated solutions are also being developed. iCapital, a significant player in the alternative investment ecosystem, has invested in Tangible Markets Ltd., a U.K.-based provider of liquidity solutions for private market positions. The stated goal of this partnership is to create an automated marketplace where financial advisors can trade illiquid holdings. However, this marketplace has yet to achieve widespread adoption within the industry.
The Valuation Challenge in Private Markets
A primary obstacle in establishing a robust secondary market for evergreen fund shares lies in the inherent difficulty of accurately determining a "premium" or "discount" to their NAV. This challenge stems from the private nature of the underlying holdings. Kimberly Flynn, president of XA Investments, a firm specializing in tracking interval and tender offer funds, notes that while eligible investors can still enter and exit these funds at their stated NAV during redemption periods, the secondary market faces a valuation conundrum.
"Where there is perceived demand, financial markets have a tendency to find a way to provide liquidity," observed Chris Osmond, CIO of Fifth Third Wealth Advisors, an RIA with $7.8 billion in Assets Under Management (AUM), whose firm invests in both evergreen and traditional drawdown structures. Osmond points to the success of continuation funds in private equity as an example of how markets adapt to provide liquidity in challenging exit environments. However, he cautions that introducing a secondary market for evergreen funds could introduce new uncertainties regarding the accuracy of their NAVs, which are often perceived as less than transparent to begin with.
Osmond further elaborated, "Given the headlines and proration we have seen [in the evergreen space], I am not surprised to see the rise of this market. I see where providing some investor liquidity makes sense. But I also think that there would be some unintended consequences. Where I kind of struggle with this is the valuation aspect. Based off what valuation [is the secondary market operating]? Is it truly going to be NAV-based going forward? Is NAV truly accurate to what the value is?"
The Harrison Street Auction: A Blueprint for Secondary Liquidity
A pivotal event in August of this year may offer a viable template for how evergreen fund investors can access secondary liquidity, particularly when a fund enters a proration scenario. This event was a secondaries auction for shares of Harrison Street Real Estate Fund Class I (VCMIX), an interval fund with $1.35 billion in total assets. After its manager, Harrison Street Asset Management, was compelled to cap redemptions for 15 consecutive quarters, the firm partnered with Nasdaq Private Markets’ subsidiary, Nasdaq Fund Secondaries, and LODAS to orchestrate an auction. This initiative aimed to provide an exit for the "loud minority of investors" seeking to liquidate their holdings.
Brian King, co-founder and CEO of LODAS, described evergreen funds as a "fantastic" innovation but acknowledged that when redemption requests exceed caps, it can quickly devolve into a public relations challenge for fund managers. Simultaneously, institutional investors with significant capital are keen to participate in these evergreen vehicles as Limited Partners (LPs).
"It’s not a problem of lack of buyers and sellers; it’s how you get those two different parties to interact with each other," King stated. "What’s unique about what we built for this is we built an auction structure that helps find price discovery, but it allows [us] to do it in kind of a timed way, so everybody gets the same price; it all happens at the same time. Price discovery is incredibly important in this particular environment, and that’s what we were trying to solve for."
Kimberly Flynn noted that Nasdaq Private Markets had been exploring auction fund concepts – non-listed, closed-end, continuously offered funds enabling shareholders to sell through Nasdaq – for approximately five years without bringing them to market. Prior to its partnership with LODAS, Nasdaq lacked a direct channel to the wealth management sector.
A 2019 whitepaper authored by Andrew Kroculick and Julia Brezing of Nasdaq outlined the advantages of an auction format for accessing secondary liquidity in private markets. These included leveraging a process familiar to legal counsel and a more structured approach to price setting. However, potential drawbacks such as a lack of transparency in price discovery and difficulties in forecasting auction success were also identified. (Nasdaq Private Markets recently completed its acquisition of Nasdaq Fund Secondaries, integrating direct company shares and secondary fund shares onto a single platform.)
The Harrison Street auction, recognized as the first intra-period auction in the evergreen fund industry, concluded on September 23rd. A significant 91% of the shares offered were sold, with 41% of sellers receiving a price higher than their initial request. The seller pool comprised at least 10 Registered Investment Advisor (RIA) firms and 60 individual investors, according to King.
The strong interest necessitated the development of a new tool mid-process to enable advisors to initiate bulk account openings on an expedited basis. The success of this initial auction was so pronounced that a second auction for the same fund was launched on October 2nd, reportedly attracting "ten times the amount of interest we had for the first auction" on the buyer side.
Flynn attributed the auction’s success to the synergy between Nasdaq’s auction expertise and the buyer community cultivated by LODAS. LODAS had already established a reputation by building secondary markets for non-traded REITs, including offerings from Blackstone and Starwood. "You can have an auction, but if nobody is there to buy the funds at a discount, it’s kind of pointless," Flynn remarked.
In October of the previous year, LODAS also established a partnership with the alternative investment platform CAIS to launch a secondary marketplace for private funds. CAIS boasts a client base of over 2,500 wealth management firms and approximately 65,000 financial advisors. While CAIS clients did not participate in the Harrison Street auction, as the interval fund was not approved on the CAIS platform, King anticipates future participation for platform-approved funds. LODAS and Nasdaq project that by the end of the current year, auctions may be held for an additional six interval funds, collectively facing redemption queues estimated at around $13 billion.
The Future of Evergreen Fund Liquidity
A key advantage of auction pricing, according to Flynn, is that it offers sellers a more favorable opportunity to achieve "fair pricing." She elaborated, "It’s not an arbitrage opportunity like you would find in the public equity markets because of the time and the risks involved, but there are reasonable secondary market buyers that would be willing to buy at a 10% or 15% discount."
Craig Kilgallen, relationship manager at FUSE Research Network, agreed that while discounts are an inherent feature of secondary markets, "there is a possibility that an increase in competition to provide liquidity could cause discounts to lessen."
King indicated that for the initial interval fund auction, LODAS prioritized simplicity to ensure the process was easily understood by both buyers and sellers. He anticipates further innovations based on participant feedback, suggesting that a viable secondary market could eventually lead to significantly compressed discounts on evergreen shares traded outside of redemption windows. "Once people understand the process and how it works, I do believe we’ll be able to make them even better from a price discovery perspective, and overtime, build more transparency," he stated.
Max Curtin, senior analyst, fixed income strategies, at Morningstar, views the ability for Harrison Street’s evergreen fund investors to decide on their acceptable discount for immediate liquidity as a prudent move. He suggests that in the future, a secondaries auction between scheduled redemption periods could serve as a form of insurance for asset managers facing potential proration stress within their funds.
However, Curtin also noted that fund managers who have not experienced significant redemption pressures might be less inclined to establish secondary markets for their shares. He reiterated that redemption caps in evergreen funds are a necessary feature due to the illiquid nature of their underlying assets and are not inherently negative. "I think the most important thing is for investors to have clarity and understanding before they are entering into these vehicles in the first place that having an expectation of getting your money back whenever you want is unrealistic," Curtin advised.
Despite these considerations, Flynn asserts that creating an auction format for the approximately 20% of evergreen funds that struggle to meet investor liquidity demands serves the best interests of all parties involved. She reasons that inevitably, semi-liquid vehicles will encounter market downturns or adverse headlines regarding their asset classes, prompting a segment of investors to seek an exit.
"By creating a viable secondary market, it is a base to build on for future auctions, meaning broader participation and improved price discovery," Flynn wrote. "The timetable for future auctions might also be faster to be announced and tighter to be executed, and would facilitate liquidity on an expedited basis. It is great to have a workable blueprint for providing increased liquidity for investors in private market funds." The ongoing evolution of secondary market solutions for evergreen funds signals a maturing landscape for alternative investments, aiming to bridge the gap between illiquidity and investor demand.
