Private market giants rethink evergreen fund growth

Mounting liquidity concerns pose a challenge for alternative asset managers.

Two of the world's largest private market managers have signaled a more cautious approach to evergreen investment funds, highlighting the growing importance of liquidity management as the sector continues to attract record levels of investor capital.

Ares Management recently capped withdrawals at 5% for a second consecutive quarter from its flagship $22.6 billion private credit fund, Ares Strategic Income Fund (ASIF), after redemption requests hit 14.4%, exceeding the fund's quarterly limit.

While the restrictions are permitted under the fund's terms, the move underscores the challenges of providing periodic liquidity in vehicles that invest primarily in illiquid private assets.

On the same day, Switzerland-based Partners Group reportedly indicated it is considering launching slightly smaller evergreen funds in the future.

Chairman Steffen Meister told Bloomberg that more modest fund sizes could help improve liquidity management and operational flexibility, even as investor demand for private market exposure remains strong.

The developments suggest the industry's focus is beginning to shift from simply gathering assets to ensuring funds can withstand periods of heightened redemption activity.

Evergreen funds offer investors regular opportunities to redeem capital, unlike traditional closed-end private equity and private credit funds that typically lock up investments for many years.

However, balancing investor liquidity has become an increasingly complex task as fund sizes have expanded.

The challenges are not unique to Ares or Partners Group.

Several large alternative asset managers have introduced redemption limits or other liquidity measures for flagship evergreen funds during periods of elevated withdrawal requests, including Apollo Global Management and Blue Owl Capital, prompting greater scrutiny of how these vehicles manage liquidity while continuing to pursue long-term investment strategies.

With private credit and other alternative assets continuing to attract institutional and wealthy individual investors, the ability to balance growth with prudent liquidity management is likely to become an increasingly important differentiator for the industry's leading firms.

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