Morningstar Releases Report on Semiliquid Funds

In a June 2025 research report, Morningstar highlights the landscape, flows, performance, and cost of semiliquid funds. The report details the expansion of private credit and highlights certain investors demand for greater returns, while also emphasizing the noteworthy risk associated with less liquid assets. The report notes that “[a]ssets in semiliquid funds grew to $344 billion at the end of 2024, up 60% from the end of 2022 when they held $215 billion in assets.” The report highlights that the largest managers of semiliquid funds are alternative asset firms that “have few, if any, assets managing public market funds.”

Semiliquid funds are primarily launched in the interval fund and tender offer fund wrappers which are not available on every retail brokerage firm platform, instead clients need to go through financial advisers directly. One barrier to entry for some investors may be the higher fees associated with the semiliquid funds. The Morningstar report states the “average annual report net expense ratio for semiliquid funds was 3.16%... meanwhile, the average annual net expense ratio for passive mutual funds and ETFs was 0.37%, while active ones charged 0.97% on average.” These costs are associated with incentive-based fees, borrowing costs associated with leverage, and potentially acquired fund fees.

Regarding fund performance, Morningstar concludes “[o]utside 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.” The data on private credit in semiliquid funds is a bit more promising, however, the extra yield generated often comes from leverage which adds additional risk not inherent in a mutual fund or ETF wrapper.

Click here to read the Morningstar report on semiliquid funds.