Goldman Sachs’ Mark Nachman warns of “publication pressure” from evergreen funds

A version of this article appeared in CNBC’s Inside Alts newsletter, a guide to the fast-growing world of alternative investments, from private equity and private credit to hedge funds and venture capital. subscription To receive future issues, directly to your inbox.

Wealthy individuals have been flocking to alternative assets in recent years, thanks in part to the explosion of evergreen funds, a specific type of fund that is specifically designed to allow for more liquidity. The problem is that the capital that goes into these funds often has to be spent immediately, and that can create distortions in the markets.

Think of this publishing structure as a $100 gift card on it. In the traditional illiquid model (usually sold to institutional investors) the fund manager can take that gift card and spend it whenever he wants – perhaps when the assets are put up “for sale.” But that’s not how evergreen money works. The virtual $100 begins to lose value every day the money is not spent. Therefore, they are incentivized to buy assets as soon as they can snap them up.

That might be acceptable if evergreen funds represent a small percentage of the total market, but with their rapid rise, some experts are raising concerns that too many managers are spending too much money at the same time.

This dynamic can, at best, put a cap on future returns. At worst, well, things can get ugly.

Goldman Sachs’ Mark Nachman runs asset and wealth management for the firm. Goldman has its own “G-Series” portfolio of open-end funds across a variety of investment strategies. Although returns could ultimately be limited by the spread of evergreens, Nachman said, he believes it will also create differentiation, similar to a “credit cycle.”

“Some people will let publishing drive investment decisions,” Nachman said in an interview. “One concern is whether you feel too much flow pressure in the evergreen fund, and do you end up taking trades that are not good returns — or not good trades — because you have deployment pressure.”

Nachman added that this type of pressure is something he pays close attention to.

“For example, I don’t have deployment goals for my team, because the last thing I want is for anyone to feel like they have to deploy for any reason,” he said.

The evergreen universe of private market funds is estimated at $427 billion, according to PitchBook, and with current trends, total assets could exceed $1 trillion within the next five years. This compares to the traditional drag fund market, which has about $15 trillion in assets and is expected to grow to more than $20 trillion over that time frame, according to PitchBook.

In addition to Goldman, several major managers — including Apollo Global, Brookfield, and KKR — have these types of products. To be sure, multi-asset managers can offer diversified, evergreen funds – covering many industries, strategies and asset classes – which can allow them to shift allocations to areas where they see the greatest opportunity.

However, one strategy in which there is perhaps the greatest risk of market distortion is the secondary market, where alternative investors buy and sell existing ownership interests – usually at a discount.

As more evergreen funds flood into the markets, this discount is diminishing. In the first half of 2025, evergreen funds offered to buy secondary assets at 91.1% of net asset value, on average, according to PitchBook, citing Campbell Lutyens data. This represents 432 basis points more than average prices in the broader market, up from a difference of 403 basis points in 2024.

Competition for secondary deals has already “hurt traditional buyers,” Pitchbook said, noting that lawyers advising on such transactions have said their traditional buy-side clients often lose out to retail funds at auctions.

The key question here is whether having too much money in private markets causes private market premiums to eventually disappear.

“Dissemination is the issue,” said Rajib Chanda, head of asset management at Simpson Thacher, who leads the design, development and structuring of products by alternative asset managers who are expanding reach. “People want to be sure of the timing and amount of deployment – ​​that’s a benefit for the consumer and a bug for the investor.”

It is worth noting that this liquidity trade-off does not mean that investors in evergreen funds can take out their capital at any time. Goldman’s Nachman also said it’s important to educate retail investors that “semi-liquid” does not mean “liquid.”

“These are illiquid private assets, so you can’t expect the same liquidity that you have from buying public stocks, where you can go and buy and sell at any moment,” Nachman said. “That’s really important — that the education and communication is there. And that then applies to asset allocation: What percentage of your assets could be illiquid?”