Semiliquid Funds: Top Vehicles, Asset Classes, and Managers

The expansion of private market access is well underway. 

Assets in semiliquid funds, which offer exposure to private assets and limited liquidity, reached $493 billion in net assets by Q3 2025.  

Source: Morningstar Direct, SEC Filings. Data as of Sept. 30, 2025.

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 the most popular way for investors to access private markets. 

They’re pooled investment vehicles that typically only allow redemptions at specific intervals, which 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 These funds may also impose restrictions on the amount that can be withdrawn during each period.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 to provide access to 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.  

There are four main structures for semiliquid funds: interval funds, tender-offer funds, business development companies (BDCs), and REITs. These vehicles, described below, aren’t traded on exchanges and transact at net asset value.

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

Specific investor eligibility standards vary across semiliquid structures and can also vary by platform. As of January 2026, SEC regulations allow semiliquid funds that own more than 15% in private funds to be available to anyone, whereas previous rules limited the availability of semiliquid funds to accredited investors. Still, investors must meet at least one eligibility requirement at the relevant tier. These requirements are shown on the table below.  

As private markets open to investors who don’t meet the high bar of qualified purchaser status, semiliquid funds have seen a surge in assets under management. 

Assets in semiliquid funds grew to $493 billion by Q3 2025, up 20% from the end of 2024 and up 63.4% from the end of 2022. This asset growth comes from investors looking for higher and seemingly smoother returns from private markets than public stocks and bonds. Still, these funds court significant risk even if the returns appear to be less volatile.   

Of the primary semiliquid vehicles, nontraded BDCs hold the most assets: approximately $145 billion in net assets as of June 2025 (the most recent data available). That’s already a 23% increase from AUM at the end of 2024. 

This increase is primarily because private credit has been the biggest driver of growth for semiliquid funds over the past three years, and nontraded BDCs have been investors’ preferred vehicle. BDCs typically have higher payout rates because they can use more leverage than interval and tender-offer funds. 

In comparison, tender-offer funds are the second-fastest-growing vehicle of choice for private equity, reaching $94 billion by Q2 2025. This is where the majority of equity semiliquid fund assets are held. 

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 Q2 2025, there was approximately $64 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.

The firm also launched its first interval fund, Blackstone Private Multi-Sector Credit and Income BMACX, in 2025.  

Cliffwater manages the largest interval fund, the private credit-focused Cliffwater Corporate Lending CCLFX. It also oversees Cascade Private Capital, which it acquired in 2024.

The table below maps out the five largest managers of semiliquid funds by AUM as of June 30, 2025 (the most recent data available). 

Source: Morningstar Direct, SEC filings. Data as of June 30, 2025. Assets in USD millions. Funds available to non-qualified purchasers.

That said, some big traditional asset managers are getting in on the semiliquid space as well. 

Pimco 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.  

And BlackRock, the largest asset manager in the world, got in on the private market space by acquiring HPS Investment Partners at the start of July 2025. 

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.   

The chart below shows the surge of interval fund launches in recent years: a total of 82 since 2020. The number of launches increased each year between 2020 and 2024—that pattern only breaking in 2025 because of the government shutdown. 

Net inflows into the largest semiliquid funds (including credit and equity) held strong with approximately $45.5 billion by Q3 2025. But real estate/infrastructure semiliquid funds have been in net outflows for the past three years and are on track to continue this trend for a fourth year.  

Source: Morningstar Direct, SEC Filings. Data as of Sept. 30, 2025.

Semiliquid funds often have more complex fee structures than ETFs, adding borrowing costs and incentive fees. 

The average annual report net expense ratio for semiliquid funds was 3.14% at the end of 2025. Meanwhile, the average annual net expense ratio for ETFs was 0.61%, while mutual funds 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.  

Here’s why these fees are so high. 

First, semiliquid funds usually employ leverage, which is the use of debt or debt-like 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 actual incentive fee, the hurdle rate, and the catch-up. 

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

Additionally, 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 incentive fees 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.  

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. 

Some asset managers are also looking to increase private market exposure in defined-contribution retirement plans—though this could introduce its own complications. Here are the pros and cons of offering exposure to semiliquid funds in target-date strategies. 

• 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 due to the overall structure of private market funds. Few semiliquid collective investment trusts 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.

Though semiliquid funds are increasing investor access to the potential of private markets, it’s also essential to recognize their risks: lack of transparency, limited liquidity, and high fees.  

Financial professionals can use the Morningstar Medalist Rating for Semiliquid Funds to navigate this burgeoning space and evaluate fund quality, risk, and potential returns. 

This blog contains the most recently available data. Please note that data may shift between report updates. Please visit Morningstar.com for the most recent data as well as breaking news content.