As the landscape of private equity investing continues to evolve, evergreen funds have emerged as a compelling alternative to traditional funds.

The performance of traditional private equity funds is typically measured using internal rates of return (IRRs), while evergreen funds are measured using annual returns. This is logical given the pattern of capital deployment for these fund types but creates a challenge for investors comparing these funds. In this paper, we explore a comparison of the returns of an investor committing to a series of traditional funds to those of an investor in an evergreen fund. We find that over a theoretical 10-year period, (i) the relative rates of return/IRRs are driven by whether the fund/program being measured is only invested in private equity or includes a liquidity portfolio, and (ii) evergreen funds have the potential to generate a higher multiple of invested capital (MOIC) by allowing investors to immediately invest and, therefore, have capital at work sooner. Please note, this paper is limited to a comparison of returns and does not contemplate other merits and considerations of the vehicles.

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