Corrected: BREAKINGVIEWS-Buyout barons’ forever funds have mortal flaws

KKR & Co

22/09/2026 19:15

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Corrects reference to Cliffwater fund in paragraph eight to make clear that a tenth, rather than a fifth, of all returns came from day-one secondary writeups.
By Liam  Proud
LONDON, Sept 23 (Reuters Breakingviews) - The doomed quest for a perpetual-motion machine led to many weird and wonderful contraptions. So has the quest for perpetual private equity. Managers like Blackstone BX.N, KKR KKR.N, TPG TPG.O, Carlyle CG.O and EQT EQTAB.ST have crafted so-called evergreen funds that package up everything from classic buyouts to high-risk, high-reward technology bets and beyond. Individual investors are pouring in, but the product still looks half-baked.
Unlike traditional funds for big, institutional investors, evergreens have no set end-date. Instead, they typically allow withdrawals equivalent to between 3% and 5% of their net asset value per quarter. Minimum commitments can be as low as $10,000. The idea is that the merely affluent individual investor can’t afford to lock up a huge sum of cash all at once for years at a time. There’s also an attraction for big institutions, though. Since evergreens immediately redeploy any profits into new investments, their cash will be constantly earning a return. In a traditional fund, money can sit idle until a choice asset comes along.
Unlike once-popular credit-focused equivalents, which are suffering painful outflows, equity evergreens are on a roll. The big beast is BXPE, run by Steve Schwarzman’s Blackstone, which already counts $26 billion in assets across its various manifestations, and is bringing in roughly $1 billion a month. Another is KKR’s K-PEC and its cousin K-PRIME, with about $21 billion between them, based on their latest filings. Switzerland’s Partners Group, an early pioneer of the movement, suffered heavy redemptions this year after poor performance, though the pain hasn’t yet spread. PitchBook reckons the wider US perpetual equity market roughly doubled from the start of 2025 to this summer, reaching about $100 billion.
Other than a propensity for acronym-based names, the vehicles have little in common. Some, like StepStone’s $10 billion SPRING, focus on venture and red-hot growth investments including SpaceX SPCX.O and Databricks. Others, like K-PRIME and EQT’s $2 billion Nexus, have more of a traditional private-equity flavor, investing alongside or even directly into the old-school institutional funds. Blackstone’s BXPE is a hybrid, putting about 30% of its dollars into deals that are not in the firm’s traditional closed-end vehicles, as with racy investments in OpenAI and Anthropic. Finally, there are evergreens that spread money across other managers’ investments, either via the secondary market or by partnering on specific co-investments. Examples include Ares Management’s ARES.N $6 billion AMPF and Carlyle’s $5 billion CAPM.
Befitting such a vast array of strategies, performance has been uneven. The aggregates are mediocre: the Morningstar PitchBook US Private Equity Evergreen Fund Index has consistently trailed its public-market equivalent in recent years, posting an 8.4% total annualized return since May 2021. Yet that benchmark obscures massive variability in outcomes. Among the industry's recent stragglers, relative to public markets, are Partners Group’s key eponymous vehicle, AMG Pantheon’s $7 billion P-PEXX and the $2 billion Pomona Investment Fund. KKR and EQT vehicles have not set the world alight either, with some of their older evergreen share classes either barely hitting or slightly undershooting the low end of a 12%-to-15% return goal.
At the other end of the spectrum sits BXPE, with a stellar 19.5% annualized return between January 2024 and June this year. Yet as with StepStone’s SPRING and TPG’s T-POP, which both tout roughly 30% returns since inception, the Blackstone vehicle has been boosted by a select few private technology bets that have massively increased in value. That means recent performance may be unsustainable. BXPE’s “growth” investments ballooned to 24% of its total portfolio as of June, from “low single digits” at launch.
It’s hard to imagine Blackstone finding another SpaceX, OpenAI or Anthropic in a hurry. And after these companies go public, the evergreens mark their shares to market. Performance therefore gets more volatile and, if SpaceX is anything to go by, worse. Case in point: in July, when Elon Musk’s newly listed rocket-maker slid in value, the month-on-month return for BXPE’s US Class I shares was just 0.4%. That compared with a range of 1% to 4% over the preceding six months. The danger is that investors pull their money as the private AI trade runs its course and performance slows. Redeeming is the only way to realize any value from equity evergreens: unlike their credit cousins, they don’t pay dividends.
A different problem lurks for the more staid perpetual vehicles with a heavy dose of secondary investments. The booming private aftermarket includes stakes in other managers’ funds and slices of so-called continuation vehicles, where buyout barons effectively sell assets to themselves. These deals typically carry a discount of, say, 10% to net asset value. The issue is that accounting rules allow perpetual funds to write the investment back up to face value immediately. About 10% of the historical returns on Cliffwater's Cascade Private Capital ​Fund are attributable to these “day-one” gains. And this semi-liquid vehicle is by no means the worst offender, according to Morningstar. The practice, which Apollo Global Management APO.N CEO Marc Rowan has said makes “no sense,” can flatter the early performance of evergreens, raising the risk of investor disappointment down the line.
Costs are another issue. Many evergreen managers take a performance fee of between 10% and 15%, sometimes in cash. This is troubling because the performance of perpetual vehicles is generally based on unrealized valuations. BXPE and some other funds have a range of clawback-style mechanisms to mitigate the mismatch, but they don’t get around the risk of a manager rewarding itself with handsome cash payouts based on paper gains, only for returns to deteriorate in future years. A better model comes from KKR, which has used locked-up shares in the evergreen vehicle as the currency for performance fees.
The overall impression, then, is of an industry that is still figuring itself out. Perhaps the biggest question is what happens when investors head for the exits. The equity evergreens often have financial penalties or other restrictions discouraging holders from cashing out after just a year or two. Still, the underlying buyout assets are less liquid than short-term loans. And there’s an unhelpful pro-cyclical dynamic: the money comes in fastest when markets are hot, which is often the worst time to invest. Outflows are most likely in a crisis, when bargains abound. Just as with old-fashioned inventions, experimentation might involve a few blowups.
Follow Liam Proud on Bluesky and LinkedIn.


(Editing by Jonathan Guilford; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))