The negative headlines around registered evergreen funds and non-traded business development companies and REITs aren’t surprising to anyone who pays attention to the mismatch between investor behavior and product design.
When investors treat quarterly redemption windows as a trading mechanism rather than a rebalancing tool, strategies get disrupted. Not because the underlying investments have necessarily failed, but because the product design and the investor’s expectations were never aligned to begin with.
Between 2022 and 2025, total net assets in U.S. evergreen fund structures grew from roughly $245 billion to nearly $500 billion, according to PitchBook, with non-traded BDCs alone going from $49 billion to $167 billion. Then redemption limits were hit. Investors lined up to exit, quarterly caps were reached, and well-known firms such as Blackstone, Starwood, and Blue Owl, found themselves managing investor panic and headlines rather than portfolios.
It’s tempting to blame the structure, but in my view the structure isn’t really the problem, at least not in isolation. The problem is how we’ve been running it.
The Irony Hidden in the Data
Most of the evergreen market was built with discretion baked in. Non-traded REITs, non-traded BDCs, and tender offer funds, which represent roughly $367 billion of the $493 billion market, are not required to offer redemptions on a fixed quarterly schedule. Their structures allow managers to return capital on their terms: when assets are exited, when cash flows support it, or when the timing makes sense. That discretion is designed to protect long-term investors from short-term ones, and short-term investors from themselves.
Interval funds, by contrast, carry a regulatory obligation — managers must offer to repurchase at least 20 percent of net assets annually, which most funds have implemented as 5 percent per quarter. That’s a meaningful structural constraint, and one that interval funds, the smallest of the four structures at $126 billion, were designed to accommodate.
The problem is that the industry has been voluntarily running the $367 billion discretionary market as though it’s subject to the same rules as the $126 billion constrained one. Firms offered quarterly windows they weren’t required to offer, at frequencies they weren’t required to maintain, because distributors expected parity with competitors. A mechanism designed to offer strategic flexibility was repositioned as an opportunity for investors to “have their cake and eat it too.” Once it was marketed that way, it was nearly impossible to take back without triggering the crunch everyone was trying to avoid.
What Using Discretion Actually Looks Like
The good news is that fixing this doesn’t require new legislation, a new product, or a structural overhaul — it requires the industry to use the tools it originally built.
For managers of non-traded BDCs, non-traded REITs, and tender offer funds, that means returning to the original intent of the discretionary structure: Distributions tied to portfolio outcomes like loan repayments, asset exits, and realized cash flows rather than an artificial calendar. Fund managers should have discretion over redemption timing, exercising it as a real portfolio management decision rather than a last resort when stress arrives. Minimum holding periods should also be standard practice and disclosed upfront, so investors can self-select into the vehicle with accurate expectations.
This also means keeping what the registered investment wrapper actually offers: friendlier tax reporting, lower minimums, and immediate subscription. Those operational innovations that opened private markets to individual investors are real and worth preserving. What needs to change is the sentence that’s placed in every pitch deck — “with quarterly liquidity.”
What the Industry Needs to Do Now
Two things must happen for this to work. Distribution platforms need to stop requiring quarterly redemption windows as a condition of inclusion. As long as that expectation persists at the platform level, managers have no real incentive to exercise the discretion their structures allow. The wealth management channel has more leverage here than it's been willing to use. It’s time to use it.
Advisors also need to hold the line with their clients and themselves. The redemption limits of the past few years occurred, in part, because investors got into vehicles their advisors didn’t fully understand or couldn’t explain. But education alone isn’t enough. If platforms continue to standardize quarterly liquidity across fundamentally different structures, the same pressure points will keep reappearing. Most of the evergreen universe already operates under discretionary frameworks; the tools are there. The real question is whether firms will use that discretion proactively or wait until regulators decide to impose a different solution for them.
Aaron Filbeck is managing director, Content & Community Strategy at CAIA Association
