Evergreen Fund

Evergreen Fund - Notre Dame, Paris, France
Evergreen Fund

An evergreen fund is a pool of capital that certain private equity and venture capital firms maintain and replenish with the proceeds from successful investments. Investors are paid through distributions when the pool becomes large enough; should they seek liquidity before that, their share of the capital pool can be sold to another investor through a private transaction.

This approach to managing a firm contrasts with that used by most private equity and venture capital firms in the United States in which a series of funds, limited in both time and money, are raised.

These firms typically raise a new fund every 3–5 years, and commit to liquidate the fund as well as return all capital and any profits within 10 years, which fits the needs of institutional investors who seek periodic liquidity. While evergreen funds are uncommon in large American firms, there are notable exceptions such as Sutter Hill Ventures.

Proponents of evergreen funds point to a major advantage: having only one capital pool means less time is spent fundraising and managing investors, allowing more focus to be put on finding and mentoring successful ventures.

Evergreen funds are also commonly used by corporate venture capital firms that work with a capital pool provided by their parent corporation, and by government agencies that set up or sponsor venture capital funds to encourage regional development.