Semiliquid Funds: Top Vehicles, Asset Classes, and Managers

The expansion of private market access is well underway. Assets in funds that offer limited liquidity and exposure to private assets approached USD 350 billion in net assets at the end of 2024.  

While semiliquid funds are making private markets more accessible, they remain much pricier and less transparent than public market funds.  

Here, we’ll cover the fastest-growing asset classes and vehicles in semiliquid funds, as well as benefits and risks to consider. Download the 45-page State of Semiliquid Funds report in full for a deeper dive. 

Semiliquid funds are pooled investment vehicles that typically only allow redemptions at specific intervals. This sets them apart from traditional funds that allow investors to redeem their investments at any time. These funds may also impose restrictions on the amount that can be withdrawn during each period. 

Semiliquid funds are commonly used for alternative investments, such as private equity, real estate, or credit strategies, where the underlying assets are not easily traded. They aim to balance the need for investor access to their money with the long-term nature of the investments they hold. To help investors navigate these new opportunities, Morningstar has launched a new ratings methodology to evaluate semiliquid funds. 

Different semiliquid fund structures offer pros and cons. The four vehicles below aren’t traded on exchanges, and all transact at net asset value. 

Semiliquid funds are primarily available through financial advisors. Individuals have limited access to purchase them directly. Charles Schwab, Fidelity, and Vanguard, the three largest retail brokerage firms, don’t allow individuals to purchase interval funds.  

Asset managers are pushing for retirement plans to add private market exposure through target-date strategies and managed accounts. However, plan sponsors’ appetite isn’t clear.  

Investor eligibility standards vary across semiliquid structures and can also vary by platform. As of May 2025, SEC regulations allow semiliquid funds that own more than 15% in private funds to be available to anyone. Previous rules limited them to accredited investors. 

Investors must meet at least one eligibility requirement at the relevant tier. This report covers those that aren’t restricted to qualified purchasers.

As private markets open to investors who don’t meet the high bar of qualified purchaser status, interest in private credit and equity fuels a surge in assets held by semiliquid funds.  

Assets in semiliquid funds grew to USD 344 billion at the end of 2024, up 60% from the end of 2022. Asset growth comes from investors looking for higher and seemingly smoother returns from private markets than public stocks and bonds, but these funds also court significant risk even if the returns appear to be less volatile.  

Nontraded business development companies hold the most semiliquid assets. Private credit has been the biggest driver of growth for semiliquid funds over the past three years, and nontraded business development companies have been investors’ preferred vehicle. BDCs typically have higher payout rates because they can use more leverage than interval and tender-offer funds. At the end of 2024, nontraded BDCs had approximately USD 118 billion in net assets.

In comparison, tender-offer funds are the vehicle of choice for private equity. More than 90% of equity semiliquid fund assets are in tender-offer funds. Since tender-offer funds aren’t required to have a fixed liquidity schedule like interval funds, there’s a better match between liquidity and the long-term nature of investing in private companies. At the end of 2024, there was approximately USD 50 billion in net assets in equity semiliquid funds.

Semiliquid fund assets are predominantly managed by alternative asset firms that have few, if any, assets managing public market funds. 

Blackstone, the largest alternative asset manager, oversees the two largest semiliquid funds:  

• Blackstone Private Credit BCRED, a nontraded BDC.

• Blackstone Real Estate Income Trust BREIT, a nontraded REIT.

In 2025, the firm launched its first interval fund, Blackstone Private Multi-Sector Credit and Income. 

Cliffwater manages the largest interval fund, the private credit-focused Cliffwater Corporate Lending CCLFX. In 2024, it acquired Cascade Private Capital to round out its offerings. 

Pimco is the only asset manager that’s predominantly public market-focused on the top 10 list. It launched its first interval fund, Pimco Flexible Credit Income PFLEX, in 2018 amid a dry spell in traditional closed-end fund IPOs. It has since launched six more interval funds, mostly focused on public credit and municipal bonds. Although these funds aren’t primarily private market-focused, they do use leverage to boost returns and can own less-liquid securities. 

In 2024, BlackRock, the largest asset manager in the world, announced its acquisition of HPS Investment Partners. The deal is expected to close later in 2025. 

1. Blackstone, 66 Billion USD 
2. Cliffwater, 31 Billion USD 
3. Blue Owl, 21 Billion USD 
4. Partners Group, 16 Billion USD 
5. Apollo Global Management, 16 Billion USD 
6. Ares Management, 11 Billion USD 
7. HPS Investment Partners, 9 Billion USD 
8. Alkeon Capital Management, 9 Billion USD 
9. Affiliated Managers Group, 5 Billion USD 
10. Pimco, 5 Billion USD 

Interval funds are expanding fast as traditional managers step into private markets. Their mutual-fund-like structure also makes them easier to implement on investment platforms than nontraded BDCs or nontraded REITs, which face state-by-state suitability rules.  

Net inflows into the largest semiliquid funds rose to approximately USD 56 billion in 2024. Equity semiliquid funds also saw a large jump in net inflows. 

After taking in USD 21 billion in 2022, real estate/infrastructure semiliquid funds have been in net outflows for the past two years. Outflows from real estate/infrastructure funds would have been larger, but the largest funds limited redemptions in 2023. The liquidity challenges investors have faced with this asset class have served as a stark warning sign of what could happen in other semiliquid fund vehicles. 

Investors used to mutual funds and ETFs are in for sticker shock when they look at semiliquid options.  

The average annual report net expense ratio for semiliquid funds was 3.16% as of their latest disclosed reports. Meanwhile, the average annual net expense ratio for passive mutual funds and ETFs was 0.37%, while active ones charged 0.97% on average.  

The implication is obvious: Private market return premiums will need to be significantly above public markets to overcome these fee hurdles. 

Semiliquid funds generally have more complex fee structures than mutual funds or ETFs.

First, they usually employ leverage, which is the use of debt or debtlike instruments to increase the fund’s asset base. That leverage comes with borrowing costs.

Semiliquid funds also often charge incentive fees, which can be material and sometimes rival—or even exceed—the management fee in terms of magnitude.  Incentive fees, sometimes called performance fees, typically have three parts:

• The “incentive fee” is a percentage of the fund’s return that the fund company earns should the fund clear its “hurdle rate.” Importantly, once the fund clears the hurdle, the incentive fee then gets applied to the whole return, not just the amount above the hurdle rate.

• A catch-up allows a fund to take all the excess return over the hurdle rate until its share of the total return is equal to the incentive fee. So if a fund’s incentive fee is 15%, it gets to keep 100% of profits above the hurdle rate until its share of the total return is 15%.

• Some funds have substantial “acquired fund fees,” which are fees paid to underlying funds held in the portfolio.

Most funds employ a 100% catch-up provision. That means their hurdle rate can be effectively irrelevant, provided that the fund earns at least enough to capture its full catch-up.

Incentive fees in fixed income present multiple issues.  

The first is that they are calculated on income and capital gains separately. So, a fund can lose value (via a decline in NAV), but if the income yield still clears the hurdle rate, the fund manager still gets to collect its income-based incentive fee.  

Clearing the hurdle isn’t a difficult task for credit managers, as they have direct control over their lending rates and, thus, their income yield. Sprinkle in leverage, and the hurdle rate is even easier to clear. 

Virtually all mutual funds and ETFs charge investors on the fund’s NAV. However, some semiliquid funds charge fees on total assets, which include assets purchased with money borrowed by the fund. Of the semiliquid funds with more than USD 500 million in assets as of year-end 2024, about 30% charged fees on total assets.  

We believe charging on total assets is a disservice to shareholders. The primary issue is that it can incentivize overleveraging a fund, as more assets equal more fees for the asset managers. Funds must be able to lend at spreads above the costs they charge shareholders. Failure to do so means that fundholders are being charged for nothing.

Funds must disclose their fees as a percentage of net assets in their prospectuses, but some funds will include their management fee as a percentage of total assets (which is lower) before the net number. This can be confusing to individual investors, and funds should make the net number the primary focus.

Funds must have access to low-cost debt to justify charging fees on total assets. In certain scenarios, charging fees on total assets is highway robbery. Funds must be able to generate a yield on borrowed money in excess of incremental fees

Outside of just a couple of funds, most semiliquid funds that focus on private equity or venture capital have failed to beat the S&P 500 since their respective inceptions, though many are still relatively new funds.  

Pomona Investment has edged out the S&P 500 over its roughly decade-long tenure. Cascade Private Capital has produced eye-popping results, though the returns are mostly unrealized gains.

Private credit has done relatively well for itself so far. The largest semiliquid private credit funds have provided investors with a return greater than could be had in leveraged loans, for example. However, most private credit funds use leverage, including all BDCs, while indexes are generally unleveraged. Leverage magnifies both losses and gains, but in private credit, the upside is easily seen, while the downside risk can be masked until a credit cycle occurs.

A growing chorus of regulators, asset managers, and politicians have pushed for more access to private markets through defined-contribution plans, which have more than USD 12 trillion in assets as of 2024. Adding a semiliquid fund, or funds, to a target date is one way asset managers could add private markets. However, it also likely increases fees and reduces transparency, and it’s not a sure thing that it will lead to higher returns.  

State Street Global Advisors is the largest firm thus far to announce a target-date strategy with private market exposure through a semiliquid fund. We expect others to follow this year, though it remains to be seen whether they will gain traction. 

In 2020, the US Department of Labor issued a statement that 401(k) plan fiduciaries could include private market exposure within a diversified multi-asset portfolio, like a target-date fund. 

Target-date funds are the most popular investment choice on 401(k) plans. At the end of 2024, target-date funds held more than USD 4 trillion in assets. 

Several target-date strategies do offer exposure to direct real estate. However, there has been little uptick in the use of private equity or private credit since 2020. 

• Target-date funds that include private market investments may offer higher long-term returns than those limited to public markets.

• Investing in private markets through a target-date strategy allows professional asset allocators to determine things like position size, fund selection, and the best rebalancing policy.

• As many companies now stay private longer, incorporating them into a target-date fund can expand its investment universe and capture more growth opportunities.

• The long investment horizon of target-date funds, often 40 years or more, aligns well with the illiquidity and extended time frames typically associated with private market investments.

• High fees can erode returns and may prompt litigation. Excessive fee lawsuits against fund companies have been more common in recent years, and any plan sponsor that increases fees would need to be wary.

• There may be less transparency around the total fees charged and holdings. The few semiliquid collective investment trusts that have launched through May 2025 own shares of other private funds and do not invest directly in equities and fixed income.

• The limited liquidity may make it harder for plan sponsors to switch target-date strategies if they decide it’s in the best interest of participants. Larger plans may have to wait several quarters or more to fully transition out of the semiliquid fund.