Morningstar released The State of Semiliquid Funds 2026 on June 16, 2026, finding that semiliquid—sometimes called evergreen—fund assets have more than doubled since 2022 and approached $600 billion as of March 2026, even as demand for private credit, the market’s prior growth engine, has cooled sharply and redemptions are on the rise.
The numbers driving that shift are specific. Over the 12 months ended March 2026, investors put roughly $8 billion into venture capital funds and about $14.5 billion into private equity, while the private credit category saw net assets fall by roughly $1 billion in the first quarter of 2026. Morningstar’s research also flags rising outflows across the semiliquid sector and an average expense ratio near 3 percent—figures that matter to anyone holding these products.
Those metrics land against common liquidity features of the product. Most semiliquid funds offer quarterly withdrawal windows that are typically capped at 5 percent. Morningstar rated 19 semiliquid funds last year, but only four earned a forward-looking Bronze or Silver Medalist Rating—an indication the market’s rapid scale has not been matched by uniformly strong analyst conviction.
The mechanism behind the shift is straightforward: capital that once poured into private credit has been rotating into private equity and venture capital, changing the composition of new semiliquid product flows. At the same time, rising redemptions and fees around 3 percent are prompting managers to rethink pricing. Morningstar notes early signs of fee competition; one recent example is Blackstone’s new 401(k) structure that gives plan sponsors a choice between an incentive fee or a flat fee.
That combination—faster growth in assets, meaningful fees, and limited withdrawal windows—creates a practical tension. Jason Kephart, Morningstar’s lead on the research, put it plainly: the semiliquid market scaled quickly on investor enthusiasm but, over the past year, has begun to run into questions about how these structures behave in stressed conditions. Kephart added that effective use of private markets depends on fundamentals and urged investors to weigh fees, leverage, and liquidity together rather than in isolation. He also said Morningstar’s independent research aims to make those trade-offs clearer.
For investors the immediate consequences are concrete. Higher average fees multiply the drag on returns in a space that promises private-markets exposure with some periodic liquidity; quarterly 5 percent caps can blunt near-term exits but do not eliminate the risk that many investors trying to leave at once could overwhelm a fund’s ability to provide cash. For managers, the combination of inflows into equity and venture strategies and outflows from credit strategies means product mixes and fee models are likely to change as firms respond to demand and regulatory and consultant scrutiny.
The study stops short of declaring a crisis, but it frames the next questions plainly. Morningstar points to early fee competition and rising investor scrutiny as likely near-term developments, and the market already shows concrete examples of fee redesign. The real test will be operational: can current liquidity terms—quarterly windows with typical 5 percent caps—absorb a larger wave of redemptions without forcing gates, heavy discounts, or structural changes to the vehicles?
That question is the clearest unresolved item the report leaves for investors and managers. The semiliquid channel has reached scale, and with scale comes a stress test: unless fees, redemption terms, or portfolio liquidity change materially, the industry may soon need to demonstrate how these funds behave when more investors try to exit at the same time.
