The nuance behind evergreen funds | PitchBook News Summary

1. Key Themes

Theme 1: Evergreen Funds Are Growing Despite Headline Panic

Evergreen fund net assets have nearly doubled since 2022, crossing the $500B threshold — but redemption headlines are distorting the underlying story.

"Net assets of evergreen funds have grown at a healthy clip since 2022, essentially doubling to surpass half a trillion dollars in 2025."

"Private debt strategies dominate, accounting for 55% of the total AUM. But it is worth noting that private equity funds are cementing their place in the evergreen world, hauling in almost $14 billion of net new money in 2025."

Performance data backs the resilience narrative:

"The US Direct Lending Evergreen Index has outpaced public markets for all sub-periods since the index's inception (Nov. 30, 2014) through January 2026."

Theme 2: Private Credit Is Under Pressure, But Not Broken

AI-triggered anxiety about software companies caused a sharp, concentrated dislocation in software loans — but non-software loans tell a very different story.

"The weighted-average bid for software loans dropped by 756 basis points through the end of February, the steepest decline since the onset of the pandemic."

"Since the end of 2025, the weighted-average bid for non-software loans has declined by 124 basis points — a meaningful drop but modest compared to that of software debt."

"LPs committed a cumulative $234.1 billion across 200 private debt funds last year, the second-most capital raised of any asset class after private equity."

Theme 3: Defense and Physical AI Attracting Massive Capital Flows

Defense robotics VC investment surged 139% YoY in 2025 — a signal of a structural investment shift, not a one-year anomaly.

"Defense and security robotics attracted $8 billion in VC across 234 deals in 2025, a 139% year-over-year increase."

The trend extends geographically, with Europe emerging as a potential physical AI winner:

"As AI innovation moves beyond LLMs and into the physical world, Europe's startups could be among the biggest winners, investors say."

Theme 4: Enterprise SaaS M&A Is Back, Driven by Mega-Deals

Q4 2025 capped the best year for enterprise SaaS M&A since 2021, with mega-deal activity leading the surge.

"Mega-deals helped drive funding for enterprise SaaS M&A to $83.7 billion in Q4. This represented a nearly 24% increase quarter-over-quarter, capping the sector's best year since 2021."

Theme 5: Secondaries as a Liquidity Mechanism in a Constrained Exit Market

With traditional exits still constrained, secondaries are playing a structural bridging role for LPs and GPs alike.

"With more than $141 billion raised across 2023 and 2024, private equity and venture capital secondaries funds offer buyers and sellers added flexibility regarding timing and structure."

"Though fundraising cooled in 2025, the report notes substantial dry powder remains, reinforcing the secondaries market as a relevant supporting route to liquidity."

2. Contrarian Perspectives

The Private Credit Doom Narrative Is Overdone

The consensus is treating private credit redemptions as an existential signal. The data shows the problem is narrow and sector-specific — confined largely to software loans — while the broader asset class remains well-capitalized.

"The shakeout is far from over, but it isn't an existential threat to the growing asset class."

"The pendulum has now swung too far, with a narrative of impending doom forming around all funds in this pocket of the capital markets. As usual, the truth lies somewhere in between."

Evidence: Non-software loan bids only declined 124bps vs. 756bps for software. The asset class raised $234.1B in 2025 — second only to PE.

Direct Lending May Be Mispricing Liquidity Risk

PIMCO's Tiffany Wilding argues that even amid the rush of LP capital into private credit, returns may not be adequately compensating investors for the illiquidity they're absorbing — a risk that's become more acute as the market doubled in five years.

"This market has basically doubled in size over the last five years, plus spreads have come down. It's a cautionary tale for us. Investors should be adequately compensated for that liquidity risk. In the direct lending markets, it's not obvious to us that they are."

AI Is Creating a Two-Tier Corporate Economy — With Losers That Are Hard to Spot

Rather than being a rising tide, AI adoption is widening the gap between companies at the frontier and those falling behind — with the losers concentrated in energy-intensive and globally trade-exposed businesses.

"Who are the losers? It's smaller and midsized companies that are more energy-intensive and are more connected to global trade, so they have more exposure to tariff-related costs. And then it's those companies that are falling behind in the AI-related race."

3. Companies Identified

Harvey

Description: Legal AI startup
Why mentioned: Raised a $200M round at an $11B valuation, led by Singapore's GIC and Sequoia — a signal of continued large-scale institutional conviction in vertical AI
Quote: "Legal AI startup Harvey secured a $200 million round led by Singapore's sovereign wealth fund GIC and Sequoia at an $11 billion valuation."

Qualified Health

Description: Enterprise AI platform for health systems
Why mentioned: Raised $125M Series B led by NEA; represents convergence of AI and healthcare infrastructure
Quote: "Qualified Health, the developer of an enterprise AI platform for health systems, raised a $125 million Series B led by NEA."

PDW

Description: Alabama-based autonomous drone developer
Why mentioned: $110M Series B; exemplifies the defense/physical AI investment surge
Quote: "Alabama-based autonomous drone developer PDW received $110 million in a Series B led by Ondas."

Normal Computing

Description: AI hardware startup
Why mentioned: $50M round led by Samsung Catalyst Fund — strategic hardware investment backing alternative AI compute approaches
Quote: "AI hardware startup Normal Computing secured a $50 million round led by Samsung Catalyst Fund."

Pave

Description: Switzerland-based last-mile satellite delivery developer
Why mentioned: $40M seed round — notable for stage size and physical AI / space logistics intersection
Quote: "Pave, a Switzerland-based last-mile satellite delivery developer, received a $40 million seed investment led by Visionaries Club and Creandum."

Epoch Biodesign

Description: London-based biorecycling provider
Why mentioned: Raised $12M with Lululemon as a strategic investor — signals corporate sustainability investment crossing into deep tech
Quote: "Epoch Biodesign, a London-based biorecycling provider, secured $12 million from investors including Lululemon."

Boralex

Description: Canadian renewable energy company
Why mentioned: Brookfield and CDPQ agreed to acquire it in a C$9B (~$6.5B) take-private — major signal of continued institutional appetite for energy transition assets
Quote: "Brookfield Asset Management and La Caisse de Depot et Placement du Quebec agreed to acquire Canada-based Boralex, a renewable energy company valued at C$9 billion ($6.5 billion) in the take-private deal."

Nothing Bundt Cakes

Description: Bakery chain
Why mentioned: KKR acquiring from Roark Capital at over $2B — a notable consumer PE deal showing continued premium valuations in branded food
Quote: "KKR agreed to acquire bakery chain Nothing Bundt Cakes from Roark Capital in a deal valuing the company at over $2 billion."

SpaceX

Description: Aerospace and space transportation company
Why mentioned: Reported to be confidentially filing its S-1 and potentially raising $25B more than expected
Quote: "SpaceX could raise $25 billion more than expected and confidentially file its S-1 as soon as this week."

Amity

Description: Thailand-based generative AI startup
Why mentioned: $100M Series D led by EDBI; signals Southeast Asian AI scaling with Singapore sovereign capital
Quote: "Thailand-based Amity, a generative AI startup, raised a $100 million Series D led by EDBI."

Gilgamesh Pharma

Description: Neurological and psychiatric disorder drug developer
Why mentioned: $60M Series A — reflects continued investor interest in neuroscience/psychedelic-adjacent therapeutics
Quote: "Gilgamesh Pharma, which develops treatments for neurological and psychiatric disorders, secured a $60 million Series A led by Satori Neuro."

Reforge

Description: Enterprise platform for product workflows
Why mentioned: Agreed to be acquired by Miro — example of SaaS consolidation M&A activity
Quote: "Insight Partners-backed Reforge, the developer of an enterprise platform for product workflows, agreed to be acquired by Miro."

DeepRoute.ai

Description: Autonomous driving technology developer
Why mentioned: Considering Hong Kong IPO — signals potential public market re-opening for autonomous vehicle tech
Quote: "GSR Ventures-backed DeepRoute.ai, a developer of autonomous driving technology, is considering a Hong Kong IPO."

4. People Identified

Tiffany Wilding

Description: Managing Director and Economist, PIMCO
Why mentioned: Cited as a key skeptical voice on private credit valuations and liquidity risk pricing; offered the most substantive analytical critique in the issue
Quotes: "This market has basically doubled in size over the last five years, plus spreads have come down. It's a cautionary tale for us. Investors should be adequately compensated for that liquidity risk. In the direct lending markets, it's not obvious to us that they are."
"Who are the losers? It's smaller and midsized companies that are more energy-intensive and are more connected to global trade...And then it's those companies that are falling behind in the AI-related race."

Juan Mier, CFA

Description: Lead Analyst, Fund Strategies, PitchBook
Why mentioned: Author of the evergreen fund analysis; driving the nuanced counter-narrative against doom headlines
Quote: "Outflows from private credit evergreen funds do not signal the end of these fund structures. But at the same time, market players...should take note of this bout of stress and rethink how best to roll out evergreen funds at scale."

Jessica Hamlin

Description: Senior Funds Columnist, PitchBook
Why mentioned: Author of the private credit analysis; synthesizing macro, LP data, and loan-level data into an accessible risk framework
Quote: "Private credit is far from extermination."

Rob Hays

Description: Newly appointed Head of Investor Relations, O2 Investment Partners
Why mentioned: Notable personnel move in the LP/fundraising ecosystem
Quote: "O2 Investment Partners appointed Rob Hays as head of investor relations."

5. Operating Insights

1. Segment Your Credit Exposure: Software vs. Non-Software Is Now a Meaningful Risk Distinction

The AI-disruption shock is not evenly distributed across private credit portfolios. Operators and lenders with heavy software loan concentrations face materially different risk profiles than diversified books.

"Software loans make up a large share of some of the largest asset managers' private credit investments and 13% of the outstanding loans tracked by PitchBook... the weighted-average bid for non-software loans has declined by 124 basis points — a meaningful drop but modest compared to that of software debt."

Operators should ensure they understand whether their lenders or credit facilities are implicated in software-heavy books, which could affect covenant terms or refinancing.

2. Evergreen Structures Require Better Investor Education and Rollout Design — Not Abandonment

The stress in evergreen funds isn't a product failure; it's a distribution and expectation-management failure. Product developers and advisers who survive this cycle will be those who built guardrails around investor behavior, not just fund mechanics.

"Market players — investors, product developers, financial advisers and regulators — should take note of this bout of stress and rethink how best to roll out evergreen funds at scale."

Entrepreneurs building wealth-management infrastructure or fund administration tools should treat liquidity communication and behavioral guardrails as core product features.

3. AI's Corporate Losers Are Identifiable — Use This as a Portfolio Screen

The PIMCO framework is actionable: flag companies that are (a) energy-intensive, (b) exposed to global trade/tariffs, and (c) slow AI adopters. These three factors compound into outsized credit and equity risk.

"Who are the losers? It's smaller and midsized companies that are more energy-intensive and are more connected to global trade, so they have more exposure to tariff-related costs. And then it's those companies that are falling behind in the AI-related race."

6. Overlooked Insights

1. The Anthropic Release Was the Catalyst for the SaaS Lending Shock

The newsletter makes a brief but important causal link: it wasn't macro conditions but a specific AI product release that triggered the software loan selloff. This is underappreciated — it implies future AI capability releases could create similarly sharp, sudden repricing events in credit markets.

"Early this year, Anthropic's release of its latest AI tools triggered a wave of anxiety about the technology's disruption to the software and professional services industries that is still working its way through the market."

2. Non-Native English Speakers and Neurodivergent Workers Are Being Penalized by AI Detection Tools

Briefly flagged as an external read, this has operational implications for HR and talent practices: hiring, performance evaluation, and content review workflows that use AI detection may be systematically disadvantaging qualified employees.

"The writing of non-native English speakers and neurodivergent people is being mistaken for AI. 'I've paid the price for living in a ChatGPT society,' one employee said."