Semiliquid Funds Hit $600B as Growth Engines Shift

The fast-growing market for semiliquid, or “evergreen,” funds is moving into a more testing phase as assets approach $600 billion and the limits of the structure become clearer, according to Morningstar’s “The State of Semiliquid Funds 2026.” After years of rapid expansion powered by private credit, investors are now rotating toward private equity and venture capital while redemptions creep higher and fee scrutiny intensifies.

Morningstar finds that semiliquid fund assets have more than doubled since 2022, but the mix is changing. Venture capital and private equity have emerged as key growth drivers as investors seek exposure to high-profile AI and technology names. Over the 12 months ended March 2026, venture capital semiliquid vehicles drew roughly $8 billion in net inflows, while private equity strategies added about $14.5 billion.

By contrast, private credit—the original growth engine for many evergreen products—is losing momentum. Concerns about software-heavy portfolios and credit quality contributed to an estimated $1 billion decline in private credit net assets in the first quarter of 2026. “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.

Fees and liquidity are emerging as pressure points. The average semiliquid fund charges around 3%, well above traditional vehicles, and headline figures often understate the full impact of incentive fees and complex, manager-friendly structures. Rising redemption activity is also testing quarterly withdrawal limits—typically capped at about 5% of assets—against portfolios built on hard-to-sell private holdings.

Despite the growth, Morningstar’s forward-looking ratings remain cautious. Of 19 semiliquid funds rated last year, only four earned a Bronze or Silver Medalist Rating, underscoring its view that relatively few are positioned to outperform peers and public-market alternatives after fees.