Persistence and ubiquity of vertically transmitted Neotyphodium endophytes in grass populations is puzzling because infected plants do not consistently exhibit increased fitness. Using an annual grass population model, we show that the problems for matching endophyte infection and mutualism are likely to arise from difficulties in detecting small mutualistic effects, variability in endophyte transmission efficiency and an apparent prevalence of non-equilibrium in the dynamics of infection. Although endophytes would ultimately persist only if the infection confers some fitness increase to the host plants, such an increase can be very small, as long as the transmission efficiency is sufficiently high. In addition, imperfect transmission limits effectively the equilibrium infection level if the infected plants exhibit small or large reproductive advantage. Under frequent natural conditions, the equilibrium infection level is very sensitive to small changes in transmission efficiency and host reproductive advantage, while convergence to such an equilibrium is slow. As a consequence, seed immigration and environmental fluctuation are likely to keep local infection levels away from equilibrium. Transient dynamics analysis suggests that, when driven by environmental fluctuation, infection frequency increases would often be larger than decreases. By contrast, when due to immigration, overrepresentation of infected individuals tends to vanish faster than equivalent overrepresentation of non-infected individuals.