JPMorgan Asset Management is warning that "window dressing" practices in private equity evergreen funds will eventually lead to market rationalization. Portfolio manager Brian Lam notes some funds achieve short-term performance boosts through secondary mark-ups, a practice that artificially inflates valuations before reporting periods.

Lam predicts diverging performance across evergreen strategies will trigger a reckoning among fund managers. He observes the growing urgency among general partners to raise private wealth capital will inevitably create market winners and losers as investors become more discerning about fund selection and performance transparency.

The Hong Kong-based portfolio manager suggests this pressure will force more honest valuation practices and better alignment between fund managers and limited partners. The shift may accelerate as institutional investors demand more consistent performance and greater operational transparency from their private equity allocations.