Decoding Evergreen Funds: Inside the Methodology Behind Sekond Ratings

Our Sekond Ratings highlight the relative performance and liquidity-risk of Evergreen funds, giving wealth advisors and their clients a clear compass in private markets.

A Rating for a fund is presented as a composite number-letter (e.g., 1-A). The first part signals the quartile ranking of the fund relative to our benchmark of Evergreen funds for a given reporting date. The second part indicates the liquidity-risk score for the fund for that same date.

Eligibility requirements

To receive a rating, a fund must be registered in the United States with the Securities and Exchange Commission ("SEC") as a "Closed-End Fund," "Interval Fund," "Business Development Company" or "Emerging Growth Company" and must primarily invest in illiquid funds or assets. The fund must have reported data for at least 12 months as of the most recent quarter-end date.

Rating methodology

The Sekond Rating methodology is based on public data reported to the SEC and in the Private Market Genome. We anticipate that data availability will change over time. Therefore, we will seek to continuously improve our rating. The Ratings comprise two independent components.

A. Quartile Ranking

The quartile rankings are determined by arranging all qualified Evergreen funds in order from highest to lowest trailing 12-month net returns, then dividing them into four equal groups using median distribution (not average/mean calculations).

Top-performing 25% of funds (Q1 - First Quartile) are defined as those with returns above the 75th percentile breakpoint.

Second-best 25% of funds (Q2 - Second Quartile) are defined as those with returns between the median (50th percentile) and 75th percentile breakpoints.

Third-best 25% of funds (Q3 - Third Quartile) are defined as those with returns between the 25th percentile and median (50th percentile) breakpoints.

Bottom-performing 25% of funds (Q4 - Fourth Quartile) are defined as those with returns below the 25th percentile breakpoint.

The breakpoints (25th percentile, 50th percentile/median, and 75th percentile) are calculated using median distribution methodology, ensuring each quartile contains an equal number of funds rather than being influenced by extreme performance outliers that could skew mean-based calculations. This approach provides a more stable and representative ranking system that isn't distorted by a few exceptionally high or low-performing funds.

The benchmark is published as of quarter end after such time as new return data becomes available to Sekond. The underlying funds included in the benchmark for a given reporting date are not expected to change except if new information presents disqualifying circumstances. Please note that new funds are added to the benchmark set as they become available and old funds are removed when they are no longer active.

B. Liquidity-Risk

The liquidity-risk score is absolute (rather than relative) and evaluates the risk that liquidity will become restricted in the fund. We determine risk by evaluating how fund cash flows stress the fund's ability to meet liquidity requirements using four factors:

1. The ratio of fund cash outflows relative to the maximum redemption cap calculated against NAV

2. The trend over time of fund cash outflows

3. The ratio of fund cash outflows relative to fund cash inflows

4. The ratio of fund cash outflows relative to short-term holdings and cash equivalents available to the fund

Fund cash outflows represent the net asset value of shares redeemed or repurchased, including exchanges. Fund cash inflows represent the net asset value of shares sold including exchanges but excluding reinvestment of dividends and distributions.

For each factor, a score of 1-4 is assigned where (1) represents the lowest stress factor and four (4) the highest stress factor. Factor scores are then summed, so each fund receives a score of a minimum of four (4) and a maximum of sixteen (16). We designate a liquidity risk rating in accordance with the following score-to-rating table:

A - 4-6

B - 7-9

C - 10-12

D - 13-16

Data review process

Sekond collects data from multiple sources and we provide transparent source references for all data points in the Sekond Ratings. We do not independently verify data with fund managers, but rely solely on publicly available information.

Sekond Ratings bridge the information gap in private markets by delivering clear, comparable fund assessments based on rigorous analysis of public data. Our dual-component rating system empowers wealth advisors to evaluate both performance and liquidity-risk, providing the clarity needed to navigate the evolving landscape of Evergreen fund investing.

Contact us

Reach out to Sekond's research team with questions or to learn more about our Ratings at research@sekond.co.

Boston, June 29, 2025

Legal Disclaimer
Sekond Ratings are opinions as of the date shown and are provided for informational purposes only. They do not constitute investment advice, an offer, or a solicitation to buy or sell any security or financial product. Past performance is not a guarantee of future results.

This post may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Sekond undertakes no obligation to update any forward-looking statements.

All data are obtained from sources believed to be reliable, but Sekond makes no representation or warranty, express or implied, as to their accuracy, completeness, or timeliness.