As high-profile companies like OpenAI or SpaceX stay private for longer and show how fast young private companies can disrupt entire industries, it’s only natural for investors to fear that they are missing an opportunity and reflect on how they can benefit from increased access to private markets.
Interest in semiliquid funds has grown against this backdrop. They lack a fixed end date and offer periodic windows of liquidity, bridging the gap between daily liquid funds and exchange-traded funds, and classic private-asset structures that feature lockups, ramp-up periods, and wind-down phases.
The starting point is still about understanding our investment objectives. For investors seeking higher long-term returns, semiliquid strategies can provide access to private equity or venture capital-style opportunities with potentially higher returns compared with public markets. Similarly, enhanced income needs can be met by semiliquid strategies in private credit, infrastructure debt, or real estate income funds. Other objectives may include capital preservation and inflation protection.
Morningstar Alternative Investing Wheel
Additional factors should be carefully considered though.
While semiliquid fund structures provide liquidity windows to get in or out of the fund, liquidity provisions are limited by design, and gating redemptions is a possibility in certain situations. Having a long investment horizon and sizing the positions carefully are therefore essential.
There is no such thing as low-cost, passive exposure to private markets. Private assets are notoriously expensive to access, which hinders investors from reaping the full benefits that private assets can deliver. At the same time, the wide dispersion of returns across strategies makes strong manager selection a requirement rather than an option.
Further, infrequent pricing hides true volatility and correlation, making privates look safer and more diversifying than they really are. As a result, traditional mean-variance models often push investors toward very high private asset allocations, but these outcomes often rest on shaky inputs.
To learn more about how to successfully construct a portfolio that spans both public and private markets, check out our full report The Role of Semiliquid Funds in Portfolios.
