Evergreen Funds Reach $607 Billion Despite Redemptions
In spite of experiencing an uptick in redemption requests tied to private credit funds in recent months, the U.S. evergreen fund markets continued to grow in the first quarter of 2026, with net inflows and positive returns.
The market grew to $607 billion and 567 funds as of March 31, up from $590.8 billion and 552 funds in 2025, according to a new report from Morningstar PitchBook. The firms also started tracking non-1940 Act evergreen funds in their most recent data, such as non-traded REITs, operating holding companies and 3(c)(7) private funds.
Funds focused on direct lending and alternative credit currently make up the largest share of the evergreen fund universe, totaling $236.5 billion and $55.0 billion in volume, respectively. Real estate funds rank second with $115.5 billion in volume, followed by private equity funds with $99.3 billion. Venture capital remains the smallest segment of the evergreen fund universe, with just $13.9 billion in volume and 3.2% of funds.
When it comes to fund structures, business development companies—which tend to be the preferred vehicle for private credit managers—continue to dominate the evergreen fund space with $196.9 billion. Interval funds are the second most popular vehicle, totaling $133.2 billion in volume, followed by tender offer funds, with $125.0 billion. Non-traded REITs, with $105.6 billion, and other non-40 Act funds, with $46.4 billion, round out the most commonly used evergreen structures.
While recent quarters have been characterized by outsized redemption requests in the private credit sector, the Morningstar PitchBook report notes that development was neither unexpected nor unique to the evergreen fund universe. With most evergreen funds that are required to pay redemptions setting their quarterly limits at 5%, their outflows make them no different from mutual funds or ETFs, most of which have experienced a similar situation at some point, the researchers wrote.
Morningstar data shows that close to 94% of all actively managed funds and ETFs had at least one quarter when they saw outflows top 5%, and 78.5% of actively managed funds and ETFs had at least one 12-month period when outflows topped 20%.
Actively managed funds that focus on alternative strategies and those that have experienced high inflows in the preceding five years are more likely to experience net outflows in the years following. Approximately 40% of these funds that grew their AUMs by 1000% or more in a five-year span saw their assets fall by half or even more in the next five years.
Given these statistics, the researchers noted that the spike in redemption requests should not have come as a surprise to evergreen—or as they are otherwise known, semiliquid—fund managers. “Retail flow patterns are remarkably consistent, and it would behoove semiliquid fund managers to manage their funds’ liquidity with them in mind,” they wrote. “The more retail money they court, the more it becomes a matter of when, not if, a run of redemptions will hit their funds.”
Retail investors and their financial advisors, on the other hand, should be prepared for the fact that the semiliquid funds they allocated money to will, at some point, experience a liquidity crunch, the researchers added. They should do their due diligence to determine how the fund’s managers plan to handle such an event when it occurs.
Net Flows and Returns
In spite of the redemption requests, interval and tender offer funds focused on alternative credit strategies still reported $12.3 billion in net flows in the 12 months through March 2026, while funds focused on direct lending reported $6.3 billion in net flows. Interval and tender-offer funds focused on private equity reported the highest net flows during the period, at $16.3 billion. The only sector that experienced net outflows was real estate, at $300 million.
However, troubles in the direct lending sector negatively impacted net total returns for the Morningstar PitchBook U.S. Evergreen Fund Index year-to-date through April 2026. The index ended the period with a total return of 1.6%, down significantly from 7.4% in 2025. Funds focused on infrastructure delivered the highest return so far in 2026, at 5.4%. Funds focused on direct lending delivered the lowest return at 0.9%.
There also continues to be a wide dispersion in returns between the best- and worst-performing funds in the evergreen space. The three-year net return for the best-performing alternative credit fund reached 34.2% as of April 2026, while the worst-performing fund lost 7.0% during the same period. The best-performing private equity fund delivered a net return of 23.4%, while the worst-performing had a 65% loss. “Picking the wrong manager can be costly in this strategy, as the worst fund’s return equates to a massive impairment of capital,” Morningstar PitchBook researchers wrote.
On the other hand, while the infrastructure sector also experienced a dispersion in returns over a three-year period, its worst-performing fund still delivered a 5.4% return. (Its best-performing fund delivered 15.6%). The sector is benefiting from a number of tailwinds at the moment, including rising demand for data centers, a worldwide move toward energy independence, and the fact that infrastructure tends not only to be an inflation-resistant asset but also to benefit from built-in price increases in user contracts.
