Private market investing is often framed around strategy, such as private equity, private credit, or real assets. Yet the structure through which these strategies are accessed can be just as important as the underlying investments themselves. Structure determines how capital is deployed, when returns may be realized, and what degree of liquidity an investor can reasonably expect.

As private markets become increasingly accessible to individual investors through product innovation and expanded distribution, understanding these structural differences has become essential. While institutional and individual investor markets are now similar in size, access to private markets was historically limited to institutions and family offices. Today, institutional managers are bringing thoughtfully designed vehicles to the wealth channel, allowing a broader range of investors to participate in private markets in ways that better align with their financial needs and constraints.

From Limited Partnerships to Modern Vehicles

Before exploring the main structures, it is worth addressing the often confusing nomenclature. The first generation of private market funds were structured as limited partnerships, typically available only to institutions and family offices. These vehicles required high minimum investments, provided limited liquidity, and delivered K-1 tax reporting. Capital was committed upfront and then “called” over time as opportunities were sourced.

These funds worked well for institutions with extended time horizons, large capital bases, and minimal liquidity needs. However, the structure proved challenging for many high-net-worth investors who were sensitive to high minimums, illiquidity, and the administrative complexity of capital calls and delayed K-1s. These vehicles are now commonly referred to as drawdown funds, a name that reflects how capital is gradually drawn and deployed.

Drawdown Funds: The Institutional Standard

Drawdown funds remain the traditional backbone of private equity, private credit, venture capital, and real assets investing. In this structure, investors make a capital commitment that is deployed over a multi-year investment period as opportunities arise. Because capital is not invested immediately, investors may experience periods of cash drag, during which uncalled capital sits in cash or public markets rather than private assets.

Returns in drawdown funds are realized gradually as portfolio companies mature and are exited, often many years after the initial commitment. Liquidity is typically unavailable for the life of the fund. Investors may also experience the well-known J-curve effect, where returns are low or negative in the early years due to management fees charged on committed capital and investments that have not yet begun generating value.

Despite these challenges, drawdown funds offer important advantages. They allow managers to deploy capital in a disciplined manner, investing when compelling opportunities arise rather than on a fixed schedule. This structure aligns well with the long-term objectives of large institutions such as university endowments, which allocate significant portions of their portfolios to private markets through drawdown vehicles.

For qualified purchasers with long horizons, substantial liquidity elsewhere, and the ability to manage capital calls, drawdown funds can be an effective tool for long-term value creation.

Interval Funds: A Middle Ground for Private Market Investors

Interval funds represent a more recent evolution in private market access, particularly for individual investors. These registered investment vehicles continuously offer shares but only provide liquidity at predetermined intervals, most commonly quarterly. Even then, redemptions are capped, typically at around 5% of the fund’s net asset value and are not guaranteed.

This intentional limitation on liquidity allows managers to invest in illiquid assets such as private loans, structured credit, and other alternative strategies that may offer diversification and income potential. Because interval funds are registered under the Investment Company Act of 1940, they often feature lower minimum investments, standardized reporting, and greater regulatory oversight.

The structure has seen rapid growth. In the U.S. alone, interval fund assets under management increased from approximately $18.6 billion in January 2020 to $93.4 billion in January 2025. A 2024 survey by NextWealth found that illiquidity remains one of the most significant barriers preventing individual investors from allocating to private markets. Interval funds address this concern by offering defined liquidity windows, providing investors with reassurance that their capital is not entirely locked up should life events or unexpected cash needs arise.

As asset managers seek to meet growing demand from non-institutional investors, interval funds have emerged as one of the most popular structures for expanding access to private markets.

Evergreen Funds: A Perpetual Approach to Private Markets

Evergreen funds offer a fundamentally different approach to private market investing. Rather than committing capital that is deployed over time, investors subscribe into a vehicle with an existing net asset value, allowing capital to be invested immediately. Evergreen private market vehicles typically maintain high deployment levels, with approximately 80%–90% of assets invested and the remainder held in a liquidity sleeve to support periodic redemptions.

When portfolio companies are exited through sales, refinancings, or public offerings, proceeds are automatically recycled into new investments. This continuous reinvestment reduces reinvestment risk and helps investors maintain consistent exposure to private markets over time.

According to research from KKR, evergreen structures may enable investors to achieve higher compounded returns compared to traditional drawdown funds, as capital remains continuously invested rather than waiting to be redeployed. For individual investors, evergreen funds can be particularly attractive as a core private markets allocation, eliminating the administrative complexity of capital calls and reducing the likelihood of being unintentionally out of the market.

Choosing the Right Structure

No single structure is inherently superior. Each serves a distinct purpose and aligns with different investor needs, time horizons, and liquidity preferences. Drawdown funds remain well suited for institutions and sophisticated investors with long-term capital and robust liquidity planning. Interval funds offer a more accessible entry point for individuals seeking exposure to private markets with defined, though limited, liquidity. Evergreen funds provide continuous exposure and operational simplicity, making them particularly attractive as a foundational allocation for individual investors.

For many individuals, blending drawdown and evergreen vehicles can enhance diversification, reduce reinvestment risk, and support stronger long-term compounding. Unlike large institutions, individual investors often lack access to a sufficiently broad set of drawdown funds to fully construct a diversified private markets portfolio. Thoughtful use of newer structures can help bridge this gap.

As private markets continue to evolve, structure is no longer a technical detail reserved for institutions. It is a defining feature of the investor experience and one that warrants careful consideration when building a modern, diversified portfolio.

References

An alternative investment platform for Financial Advisors. Crystal Capital Partners. (2025, February). https://www.crystalfunds.com/insights/drawdown-funds-vs-interval-funds 

Davidow, T. (2025, April). Accessing private markets: Evergreen and drawdown funds. Franklin Templeton . https://www.franklintempleton.com/articles/2025/institute/accessing-private-markets-evergreen-and-drawdown-funds 

Huber, P. (2025, September). Evergreen Private Equity for the Long Run. Cliffwater. https://www.cliffwater.com/ResourceArticle/evergreen-private-equity-for-the-long-run?docId=29441 

Private markets pioneers: The rise of interval funds. Alter Domus. (2025, May). https://alterdomus.com/insight/private-markets-pioneers-the-rise-of-interval-funds/ 

Snyder, A., Sun, L., & Reade, N. (2023, June). Comparing private market fund structures: Evergreen vs. drawdown. CAIS. https://www.caisgroup.com/articles/the-potential-trade-offs-of-private-markets-fund-structures-part-two 

Wood, A. A., Roberts, P. C., & Park, J. (2024, May). An evergreen vehicle can be an important tool in private equity asset allocation. KKR. https://www.kkr.com/insights/evergreen-vehicle-private-equity 

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