An evergreen future for emerging market private credit?

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" src="/getContentAsset/ec7b6482-68e6-4583-b158-b380103b3a01/cb87803a-320c-480f-ab75-7b9029eaaf79/Felipe-Berliner-1_1.jpg?language=en" alt="Felipe Berliner 1_1" title="FELIPE BERLNER 1_1" style="width: 180px" class="fr-fic fr-dib fr-fil"></div><span style="font-size: 12px"><div class="col"><strong>Felipe Berliner<br></strong>CO-FOUNDER &amp;<strong data-renderer-mark="true">&nbsp;</strong>HEAD OF STRUCTURING<br><br><p>Felipe Berliner is a Co-founder and the Head of Structuring at Gemcorp Capital, where he leads the firm’s investment structuring and execution.<br><br>Prior to co-founding Gemcorp in 2014, Felipe spent most of his career at Merrill Lynch and Goldman Sachs within the emerging markets structuring team. He was also a director at VTB Capital, working on financing companies, financial institutions and sovereigns across Sub-Saharan Africa, Latin America, Eastern Europe and Asia. Before his banking career, he worked as a capital markets, M&amp;A and project finance lawyer in Brazil.<br><br>Felipe holds a Law degree from Universidade Candido Mendes in Brazil and an MBA from INSEAD in France.</p></div></span></div><hr><p><em>Recent volatility in US private credit has exposed strains within evergreen funds holding long-dated, illiquid loans. Felipe Berliner explains why emerging market private credit may offer a better fit for such vehicles</em></p><p>As we first started talking about in Gemcast Episode 1 in June and then discussed in ‘Beyond the comfort zone’ , we have been questioning the risk in developed market private credit for some time. It was therefore unsurprising to us that it did not take long for the slump in software share prices to spill over into other corners of the financial market. In February, a high-profile US private credit manager halted redemptions on a $1.6 billion evergreen fund, triggering a 9% single-day decline in its stock.¹&nbsp;</p><p>The issue was caused by a combination of portfolio concentration and stress. Around a fifth of business development company loan books sit in software,² a sector facing existential questions about artificial intelligence disruption.&nbsp;</p><p>When investor confidence in the underlying credits weakened, the structural features of semi-liquid vehicles amplified the pressure. Assumptions about liquidity windows in these vehicles had to be revised. And the episode brought to light an important question: are semi-liquid funds the right structure for illiquid assets?</p><p>The answer, in my view, depends less on the wrapper and more on what sits inside it.&nbsp;</p><h2 style="font-size: 2rem">The rapid rise of evergreen funds</h2><p>Evergreen funds are perpetual-life vehicles that raise and invest capital continuously while offering periodic liquidity to investors.</p><p>Unlike traditional drawdown funds with fixed commitments and finite terms, evergreen vehicles accept regular subscriptions (usually monthly, sometimes daily) and offer quarterly repurchase windows to investors looking to exit, often capped at around 5% of net asset value.³</p><p>In the US, evergreen private market funds held approximately $493 billion in net assets by the end of the third quarter last year, with estimates this could exceed $1 trillion by 2029.⁴ Direct lending strategies represent the largest share – assets have more than tripled since 2022 to over $200 billion.</p><p>The appeal is clear. Evergreen structures lower minimum investment thresholds, broaden investor access to private markets and provide regular income distributions. For wealth platforms and retail investors, they are seen as a more appealing alternative to the capital calls and long lock-up periods associated with traditional, closed-ended vehicles.&nbsp;</p><p>The growing interest in evergreen funds is not inherently problematic. But such structures should be closely aligned with the profiles of the underlying assets.&nbsp;</p><h2 style="font-size: 2rem">The structural issues investors should understand</h2><p>Not all evergreen structures offer the same level of liquidity.</p><p>Interval funds, regulated under the 1940 Act, are required to offer quarterly redemption windows, typically between 5% and 25% of outstanding shares. If redemption requests exceed the available window, investors receive a pro-rata allocation and must resubmit their request in subsequent quarters. The fact that quarterly liquidity is mandatory, not discretionary, offers structural protection, although investors may still face delays in getting their money back when redemptions are high.</p><p>Non-traded business development companies, by contrast, feature repurchase programmes that are subject to board discretion and can be suspended without warning. The quarterly window is a feature, not a guarantee.&nbsp;</p><p>It is also worth highlighting that the weighted average lives of US private credit portfolios are typically around four years.⁵ Most loans have bullet maturities where principal is repaid in one lump sum on the maturity date, while some loans incorporate payment-in-kind (PIK) features that defer cash interest until maturity. Such structures reduce the pace at which capital is returned to investors, increasing reliance on refinancing or secondary exits to generate liquidity.</p><p>This is a non-issue when inflows exceed outflows. It becomes more challenging if redemptions persist while fundraising slows.</p><p>The key point is that evergreen structures require active liquidity management in addition to disciplined credit underwriting, with particular rigour required around collateral and cashflows.&nbsp;</p><h2 style="font-size: 2rem">Why emerging market private credit could be a better fit&nbsp;</h2><p>To be viable in all conditions, private credit evergreen funds need to meet three criteria: shorter-duration assets, diverse economic drivers and natural liquidity. This is where emerging market private credit could be more a better fit than its US or European counterparts.&nbsp;</p><p>Emerging market private credit, in aggregate, exhibits shorter weighted average lives than US direct lending – approximately 2.5 years versus four years.5 In vehicles that are predominantly exposed to trade finance and commodity-backed lending, durations can be significantly shorter still. Hard-currency, self-liquidating trade loans often mature within 30 to 180 days, while a further segment of direct loans may sit in the one-to-three-year range.⁶ &nbsp;</p><p>Shorter contractual maturities create natural liquidity. Capital is returned through amortisation and repayment rather than secondary sales or refinancing. That is vital for vehicles offering periodic redemption windows.</p><p>Emerging market private credit also has a diversified set of economic and sector drivers. Deal flow is more frequently driven by financial services, consumer sectors, infrastructure, commodities and real assets. These exposures are linked to demographic growth, urbanisation, trade flows and infrastructure build-out rather than private equity entry multiples or technology valuations.</p><p>Sector diversification alone does not eliminate risk. But it reduces reliance on a narrow set of return drivers, correlations are lower and vulnerability to a sector-specific shock is materially reduced.</p><h3>A way forward</h3><p>Evergreen funds have expanded access to private markets and will remain an important part of the ecosystem. They function effectively when liquidity expectations are realistic, underlying assets are matched to the structure and concentration risks are properly understood.</p><p>Recent events illustrate that liquidity mismatches tend to reveal themselves during periods of stress, which turn structural features into structural vulnerabilities.</p><p>For investors considering allocating to an evergreen private credit strategy, three questions are worth asking:</p><ol><li>What is the weighted average life of the underlying portfolio and how does that compare to redemption frequency?</li><li>Is the portfolio well diversified in terms of sector and economic drivers?&nbsp;</li><li>Where does liquidity come from – secondary sales, public market proxies or contractual repayments?</li></ol><p>Structure does not replace underwriting discipline. But in a market that has grown rapidly, structure deserves as much scrutiny as credit quality. Evergreen funds are not the issue. The issue is what’s inside them.</p><p><br></p><p><strong>References</strong></p><ol><li>Bloomberg, Blue Owl Anxiety Rattles $1.8 Trillion Private Credit Market, February 2026</li><li>Financial Times, Investors sour on listed credit funds over AI hit to software sector, February 10, 2026</li><li>Gemcorp, Internal analysis on US evergreen funds, February 2026</li><li>Morningstar, <em>The Rise of Evergreen Funds: A New Way to Access Private Markets</em>, January 2026</li><li>Global Private Capital Association, <em>Private Credit Outlook</em>, December 2025</li><li>6. &nbsp; &nbsp;Gemcorp, Internal analysis of Gemcorp Commodities Alternative Products Fund, February 2026</li></ol><p><br></p><p style="font-size: 12px"><strong>Important Information:</strong></p><p style="font-size: 12px">This content has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced.</p><p style="font-size: 12px">This content does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. 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