The alternative investment universe has evolved rapidly, offering fiduciary investment firms, advisors and investors a spectrum of liquidity profiles and access points. Among these, semi-liquid funds; including interval funds, tender-offer funds, non-traded business development companies (BDCs) and non-traded real estate investment trusts (REITs), have emerged as a bridge between traditional liquid alternatives and illiquid private funds. These vehicles are increasingly utilized by investment advisors for their ability to democratize access to private markets, provide periodic liquidity and integrate with wealth advisory platforms.
Structural Overview
Semi-liquid funds are not defined by a single regulatory wrapper but by their structural features: perpetual or open-ended lifespans, continuous capital raising, and scheduled liquidity windows. They exist alongside evergreen funds, traditional limited partnership drawdown funds, ETFs, mutual funds, and closed-end funds, each offering varying degrees of liquidity, investor qualifications, and minimum investment requirements.
• Interval Funds: Registered under the Investment Company Act of 1940 (’40 Act), these funds must offer to repurchase 5% – 25% of outstanding shares at set intervals, typically quarterly. Subscriptions are usually daily, and minimum investments usually range from $1,000 to $10,000.
• Tender-Offer Funds, Non-Traded BDCs, Non-Traded REITs: These vehicles offer periodic liquidity at the discretion of the governing board, with less stringent legal requirements for redemptions. Minimum investments are typically higher ($25,000–$50,000), and investor eligibility is often restricted to accredited or qualified purchasers.1
• Drawdown Funds: Traditional private equity, credit, and real estate funds with finite lifespans and illiquid structures, requiring large minimum commitments and offering little to no interim liquidity.
Potential Benefits & Risks
Semi-liquid funds have emerged as a bridge between traditional private investments and the growing demand for flexibility among wealth management clients. While these vehicles offer unique opportunities to access private markets with lower minimums and periodic liquidity, they also introduce structural and operational risks that require careful evaluation.
Below, we outline the key benefits and risks to help wealth advisors and investors weigh the trade-offs before incorporating these strategies into a portfolio.
Benefits
• Access to Private Markets: Semi-liquid funds, previously limited to institutional investors, open private equity, credit, and real estate to retail and mass-affluent markets.
• Lower Minimums: Compared to traditional private funds, semi-liquid vehicles require smaller investments, broadening participation.
• Periodic Liquidity: Investors can redeem a portion of their holdings quarterly or monthly, providing more flexibility than traditional private funds.
• Platform Availability: Many semi-liquid funds are available on major custodial platforms (Schwab, Fidelity, Pershing), with ticker-based trading and simplified paperwork requirements.
• Diversification: Exposure to non-correlated assets can reduce overall portfolio volatility.
• Regulatory Oversight: Most are registered under the ’40 Act, offering transparency and investor protections.
Risks
• Asset-Liability Mismatch: Redemption requests may exceed available liquid assets, forcing managers to sell illiquid holdings at a discount (“fire sale” risk).
• Gating Risk: Funds may impose gates or suspend redemptions during periods of high demand, potentially freezing investor capital.
• UBTI Exposure: Use of leverage may generate Unrelated Business Taxable Income (UBTI) which is problematic for tax-exempt investors and non-taxable portfolios.
• Valuation Complexity: Net asset values (NAVs) are often based on appraisals or models, which may lag real-time market prices.
• Fee Structure: Semi-liquid funds typically charge higher fees (management, performance, fund expenses) than mutual funds or ETFs.
• Immature Market: Many funds are newly launched with limited track records, increasing due diligence requirements.
Market Trends & Data
• Growth: Net assets in semi-liquid funds have surged, with credit-focused funds reaching $188 billion by the end of 2024 – more than doubling since 2022. Private equity semi-liquid funds reached $50 billion in assets during the same time period.2
• Fee Comparison: Average expense ratios for semi-liquid funds are 3.16%, roughly three times higher than active mutual funds (0.97%). Incentive fees, leverage costs, and acquired fund fees contribute to the complex cost structure.3
• Leverage: 70% of semi-liquid credit funds employ fund-level leverage, averaging 20.8%—nearly five times that of private equity funds use of leverage at 4.3%. Non-traded BDCs can use up to 66.7% leverage, far outpacing interval funds.3
• Performance: The largest semi-liquid private credit funds have delivered higher excess returns than leveraged loan indexes, though this is partly driven by leverage and may mask downside risks. Semi-liquid private equity funds have generally lagged broad market equity indices outside of a couple exceptions. 3
• Investor Eligibility: Access is typically limited to accredited investors, qualified clients, or qualified purchasers, depending on the fund structure.
• Fund Launches: Interval funds have seen record launches, with 20 new funds through May 2025, on pace to surpass 2024’s record of 27. 3
Tax Considerations
Most semi-liquid funds elect to be treated as Regulated Investment Companies (RICs) or REITs, distributing at least 90% of taxable income to shareholders and avoiding double taxation. However, funds that do not fall within one of these categories, and which utilize leverage in their investment strategies, may generate UBTI or Unrelated Debt-Financed Income (UDFI) for tax-exempt accounts. As a result, careful examination of fund structure and tax impacts is required by financial advisors and tax professionals prior to investing.
Wealth Channel Dynamics
The private wealth channel has been – and is expected to remain – a key growth area for alternative fund managers. Since 2019, over 230 private market funds have been launched, including interval funds, tender offer funds, non-listed BDCs and REITs. Large managers such as Blackstone, Blue Owl, and KKR have built out dedicated wealth platforms, with some reporting that more than 40% of their total AUM comes from this channel. With nearly $400 billion in AUM across semi-liquid fund wrappers today, growing demand for diversification and access to alternative investments, and technology platforms like CAIS, iCapital, and Moonfare streamlining access and due diligence for wealth advisors, the space is poised for continued growth.
Conclusion
Semi-liquid funds represent a significant alternative investment landscape balancing access, liquidity and diversification with higher fees and unique risks. Their rapid growth and adoption reflect investor demand for private market exposure and periodic liquidity, but careful due diligence and ongoing education are essential to navigate their complexities. Advisors must weigh liquidity constraints, fee structures, tax implications and fund transparency when including semi-liquid structures in client portfolios.
To explore how semi-liquid funds can support your portfolio goals, contact the professionals at Fiducient Advisors.
1Morningstar: The State of Semi Liquid Funds, June 2025.
2Pitchbook: The Return of Evergreen Funds, June, 2025.
3Morningstar: The State of Semi Liquid Funds, June 2025.
4Company reports, Geography: Global, As of June 20, 2024.
The information contained herein is confidential and the dissemination or distribution to any other person without the prior approval of Fiducient Advisors is strictly prohibited. Information has been obtained from sources believed to be reliable, though not independently verified. Any forecasts are hypothetical and represent future expectations and not actual return volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. The opinions and analysis expressed herein are based on Fiducient Advisor research and professional experience and are expressed as of the date of this report. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is risk of loss.
