Morningstar: Semiliquid Funds Hit $600B as Private Credit Cools, June 16

Semiliquid fund assets approached $600 billion as of March 2026, more than double the amount from 2022, according to Morningstar Inc.‘s latest report. The market is entering a new phase as investor demand shifts away from private credit toward private equity and venture capital. Early signs of fee competition are emerging as asset managers respond to increased scrutiny around costs.

Private Credit Loses Momentum

Private credit, which fueled most growth in semiliquid funds over recent years, is losing steam. Concerns over software company exposure and credit quality have dampened investor demand, with redemptions rising sharply in 2026. Advisors are pulling client shares at record levels as fears of defaults and bankruptcies mount.

Venture Capital and Private Equity Lead Growth

Venture capital and private equity emerged as the new growth drivers. 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. Investors are seeking exposure to high-profile AI and technology companies through these structures.

Fee Competition Intensifies

Asset managers are responding to increased scrutiny around costs, with early signs of fee competition emerging across the semiliquid fund market. Alternative investments like semiliquid funds carry expense ratios averaging 3%, significantly higher than traditional public market funds. This pressure reflects investor demand for better value as the market matures.

Market Maturity and Transparency Challenges

The semiliquid market has scaled rapidly but is now colliding with questions about how these structures behave in practice. Investors need to understand the trade-offs between fees, leverage, and liquidity when allocating to private markets. Morningstar emphasizes that effective use of private markets requires a focus on fundamentals and a holistic view of these factors.

Final Thoughts

Semiliquid funds have doubled to $600 billion since 2022, but the market is shifting from private credit to private equity and venture capital. Fee pressure and redemptions signal a maturing market where investors must weigh costs against access.

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