Investors Flock to Semiliquid Funds for Income

Alternative asset managers’ push to make investing in private markets mainstream is gaining momentum. Assets in semiliquid funds available to nonqualified purchasers totaled almost $450 billion at the end of June 2025, up 16% from the end of 2024 and up 77% from the end of 2022.

Semiliquid funds, which include interval funds, tender-offer funds, nontraded business development companies, and nontraded REITs, offer periodic redemptions of typically 5%–10% of assets each quarter. This structure allows managers to invest in illiquid securities while still allowing investors to sell shares periodically. Those illiquid securities are often private investments, like direct loans or private equity, that aren’t otherwise accessible to investors who don’t meet the eligibility standards based on their net worth.

Credit-focused strategies remain the most popular, with assets in semiliquid credit funds climbing to $230 billion, a 22% increase since the end of 2024. These funds have delivered higher yields than public fixed income by combining floating-rate loans with leverage. Because floating-rate bonds pay interest based on a spread over short-term rates, their income rises when short-term rates are high and falls when rates decline.

While a widely expected Federal Reserve rate-cutting cycle will likely reduce income from floating-rate credit funds, there is no sign that investor appetite for the asset class is waning.

For nontraded REITs, net assets are now based on the manager’s estimate of fair value rather than GAAP, which uses historical cost and deducts depreciation. This change increases reported asset levels compared with our prior report, though the overall trend of flat to declining assets across the category remains the same.

Private Credit Is Still Thriving

The most popular and fastest-growing semiliquid vehicle remains the nontraded BDC, which provides direct and straightforward exposure to private credit through loans. By registering as a BDC, a fund must invest at least 70% of its portfolio in loans to private companies or public companies with a market cap under $250 million and must distribute at least 90% of taxable income to shareholders, similar to a REIT. These funds, however, tend to be expensive, often charging a 1.25% management fee plus a 12.5% income-based incentive fee. Assets in nontraded BDCs reached $145 billion at the end of June, up 23% from the end of 2024.

Tender-offer funds were the second-fastest-growing vehicle, reaching $94 billion, up 18%, followed by interval funds, up 16% to $118 billion, and nontraded REITs, up 4% to $92 billion.

How the Largest Semiliquid Credit Funds Have Fared

Exhibit 3 shows the net assets, recent net flows, and returns for the 10 largest semiliquid credit funds.

Cliffwater Corporate Lending CCLFX continues to lead all interval funds in net inflows, and its $4.54 billion haul in the first half of 2025 was second only to Blackstone Private Credit. While the nontraded BDCs mostly own loans directly, Cliffwater invests in both other private credit funds and direct loans, through co-investments with the funds it owns.

The 10 largest funds have been able to outpace the Morningstar LTSA US Leveraged Loan Index, but much of that outperformance can be attributed to leverage.

Pimco Flexible Credit Income PFLEX earned a Morningstar Medalist Rating of Silver in Morningstar’s initial round of ratings for semiliquid funds, indicating our conviction that the fund will outperform its Morningstar Category benchmark over a full market cycle. Star managers Dan Ivascyn and Alfred Murata lead a top-tier Pimco team that applies a proven, opportunistic, relative value approach across both traditional and higher-risk strategies. It distinguishes itself from many of the other strategies in the top 10 by doing only a small amount of direct lending (6%) and owning more public debt (63%) as of June 30. It does employ leverage, which has helped drive its higher relative returns versus peers.

How the Largest Equity Funds Have Fared

Exhibit 4 shows the net assets, recent net flows, and returns for the 10 largest semiliquid equity funds.

Cascade Private Capital, which was acquired by Cliffwater in 2024, continues to rapidly raise assets. This fund primarily invests in secondary offerings of private equity funds. Secondary funds get a return boost from being able to buy shares of private equity funds at a discount and mark them back to their stated net asset value. Strong inflows can lead to even better performance. Investors should be wary of high early returns for secondary-focused funds on account of this phenomenon.

Performance for the largest semiliquid equity funds has generally been positive for the first half of the year. The Morningstar US Market Index did experience a nearly 20% drawdown from February through April, which weighed on its returns. Semiliquid equity funds have drawn criticism for appearing to understate the actual volatility of their underlying holdings, which may have contributed to their outperformance.

Investors Prefer Alternative Asset Managers for Semiliquid Funds

Fund companies best known for their mutual funds and exchange-traded funds have yet to gain much traction with semiliquid fund investors, despite a slew of attention-grabbing headlines over the past 12 months.

The largest providers are those that specialize in private market investing and were early to start marketing to financial advisors, like Blackstone, which began its private wealth group in 2011.

The five largest firms managed approximately 46% of all assets in semiliquid funds available to nonqualified purchasers. Blackstone’s market share did slip a little in the first half of 2025. That’s attributable to still-tepid investor interest in nontraded REITs, of which Blackstone Real Estate Income is the largest by leaps and bounds.