Morningstar Report Finds Semiliquid Fund Market Nears $600 Billion as Private Credit Loses Steam

Key Terms

semiliquid funds financial

Semiliquid funds are investment pools that let investors take money out only under certain conditions or at set times, rather than on demand like a bank account. They typically invest in assets that can be sold but may require notice periods, limited windows for withdrawals, or fees to access cash. For investors this matters because semiliquid funds balance higher potential returns from less-traded assets with reduced short-term access to cash—think of them as a savings jar you can open only on specific days.

evergreen financial

An evergreen financing arrangement is a credit or funding setup that automatically renews or remains available over time instead of ending after a fixed term, like a library card that stays active as long as you follow the rules. It matters to investors because it provides companies with predictable access to cash, reducing the risk of sudden funding gaps that can hurt operations, borrowing costs and share value.

private credit financial

Private credit is a form of borrowing where companies or organizations obtain loans directly from private lenders rather than traditional banks or financial markets. It often involves customized financing arrangements that are not traded publicly, making it a way for businesses to access funding outside of standard channels. For investors, private credit offers the potential for higher returns, but typically comes with increased risk and less liquidity compared to more conventional investments.

venture capital financial

Venture capital is money provided by specialized investors to young, high-growth companies in exchange for ownership stakes and often a role in shaping strategy — like planting seeds and helping them grow into trees. It matters to investors because venture funding can rapidly boost a startup’s resources, valuation and chances of success, but it also brings high risk and limited liquidity, affecting future returns and how shares behave at exits such as sales or public offerings.

expense ratio financial

The expense ratio is the annual fee a mutual fund or exchange-traded fund charges to cover its operating costs, shown as a percentage of the fund’s assets. Think of it like a yearly maintenance or subscription fee that quietly reduces your investment’s returns; even small differences matter over time because the fee compounds against your gains. Investors compare expense ratios to judge how much of their returns will be eaten by fund costs.

View in glossary

401(k) plans regulatory

Employer-sponsored retirement savings accounts that let workers set aside part of their pay into investment choices, sometimes with matching contributions from the employer; money can be contributed before taxes or after taxes depending on the plan type. Think of it as a dedicated, long-term piggy bank that grows through investments and occasional employer top-ups—important to investors because 401(k) funds represent a large, steady source of capital in the market and influence consumer savings, retirement security, and long-term stock demand.

net inflows financial

Net inflows are the total amount of money that investors put into a fund, market, or financial vehicle minus the money that is withdrawn over the same period. Think of it like water flowing into a bucket: if more water is poured in than taken out, the bucket grows; net inflows show growing investor demand and can boost a fund’s size, liquidity and potential pricing power, while sustained outflows can signal weak confidence and pressure returns.

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Latest State of Semiliquid Funds points to signs of a maturing market and highlights the importance of investor understanding as private market access expands.

CHICAGO--(BUSINESS WIRE)-- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today released “The State of Semiliquid Funds 2026,” highlighting a rapidly evolving market approaching $600 billion in assets that is entering a new phase as investor demand shifts and key risks become more apparent.

The report finds that semiliquid, or “evergreen,” fund assets have more than doubled since 2022, following several years of growth fueled by private credit. More recently, however, demand for credit strategies has cooled sharply, redemptions are rising, and capital is rotating into private equity and venture capital funds. At the same time, early signs of fee competition are emerging as asset managers respond to increased scrutiny around costs.

“The semiliquid market has scaled rapidly on the back of investor enthusiasm, but over the past year it has begun to collide with questions about how these structures actually behave in practice,” said Jason Kephart, senior principal at Morningstar. “To effectively use private markets, we believe the focus should be on fundamentals, with investors taking a holistic view of how fees, leverage, and liquidity shape outcomes. Our independent research helps improve transparency and bring those trade-offs into focus.”

Key Findings

• Semiliquid fund assets approached $600 billion as of March 2026.
  Venture capital and private equity emerged as key growth drivers, with investors seeking exposure to high-profile AI and technology companies. Venture capital funds recorded approximately $8 billion in net inflows over the 12 months ended March 2026, while private equity inflows reached $14.5 billion.
• Private credit—previously the main growth engine—is losing momentum.
  Concerns over software exposure and credit quality have dampened investor appetite, contributing to a roughly $1 billion dip in net assets for the category during the first quarter of 2026.
• High fees remain a core challenge for outperformance.
  The average expense ratio for semiliquid funds is around 3%, significantly higher than traditional funds, and often excludes the full impact of incentive fees. Investors should also be aware that many complex fee structures continue to favor managers.
• Liquidity pressure is coming into focus.
  Demand for redemptions has been rising, exposing the gap between limited withdrawal windows and hard-to-sell private assets. Most funds allow quarterly withdrawals, capped at 5%, which for some funds may not hold up when many investors try to exit at once.
• New pricing models could reshape how investors access private markets.
  Blackstone, who dominates market share by assets, recently introduced a structure that gives 401(k) plans a choice between an incentive fee or a flat fee that may lead to lower expenses over time—an early indication that fee competition may be emerging, particularly in retirement channels.
• Few semiliquid funds earn strong ratings.
  Morningstar rated 19 semiliquid funds last year, but only four received a forward-looking Medalist Rating of Bronze or Silver, reflecting Morningstar’s view that few funds are likely to outperform peers and public market equivalents after fees.

The trends in the report underscore the view that access to private markets is only valuable if investors understand the management of funds in their portfolio. Yet a significant knowledge gap remains, with just 16% of financial advisors saying they are “very familiar” with semiliquid fund structures¹. Morningstar’s research and semiliquid fund ratings aim to promote greater transparency and a more consistent language for investors and advisors to compare fees, liquidity, leverage, and potential outcomes.

Read the full State of Semiliquid Funds 2026 report here.

1 Source: Morningstar Investor Perspectives. Data as of 2026.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, institutional investors in the debt and private capital markets, and alliances and redistributors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $370 billion in AUMA as of March 31, 2026. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on X @MorningstarInc.

Morningstar’s Manager Research Group

Morningstar’s Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar Manager Research provides independent, fundamental analysis on managed investment strategies. Morningstar views are expressed in the form of Morningstar Medalist Ratings, which are derived through research of three key pillars—People, Process, and Parent. The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. A global research team issues detailed research reports on strategies that span vehicle, asset class, and geography.

Medalist Ratings are not statements of fact, nor are they credit or risk ratings, and should not be used as the sole basis for investment decisions. A Medalist Rating is not intended to be nor is a guarantee of future performance. This press release is for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

©2026 Morningstar, Inc. All rights reserved.

MORN-R

View source version on businesswire.com: https://www.businesswire.com/news/home/20260615497773/en/

Michael Claussen, +1 312 696-6037, newsroom@morningstar.com

Source: Morningstar, Inc.