What Are Semi-Liquid Private Equity Funds? A Complete Guide
The definitive guide to semi-liquid fund structures in private markets - offering enhanced liquidity without sacrificing returns
Key Highlights
- Quarterly or semi-annual redemption windows
- Hybrid portfolio construction combining direct PE with more liquid strategies
- Lower minimum investments than traditional private equity
- Enhanced reporting frequency with regular NAV calculations
- Reduced J-curve effect through secondary investments
- Access to leading managers like Schroders Capital and Partners Group
What Are Semi-Liquid Private Equity Funds?
Semi-liquid private equity funds are innovative investment vehicles that bridge the gap between traditional closed-end private equity funds and more liquid investment options. These structures offer improved liquidity terms while still providing access to the potential returns of private market investments. Unlike fully liquid investments (such as mutual funds or ETFs) or traditional private equity (with 10+ year lockups), semi-liquid funds strike a balance that appeals to a broader range of investors.
Key Characteristics of Semi-Liquid Funds
Enhanced Liquidity Features: Semi-liquid funds typically offer quarterly or semi-annual redemption windows, allowing investors to access their capital more frequently than traditional private equity. These redemptions are usually subject to certain restrictions, gates, or notice periods to manage the fund's overall liquidity.
Hybrid Portfolio Construction: These funds often combine direct private equity investments with more liquid strategies, such as listed private equity, secondaries, or private credit. This hybrid approach enables the fund to manage liquidity needs while still generating private market returns.
NAV-Based Pricing: Like evergreen structures, semi-liquid funds generally price based on Net Asset Value (NAV), which is calculated more frequently than traditional PE valuations (often quarterly).
Lower Investment Minimums: Many semi-liquid funds have lower minimum investment thresholds (often $100,000-$500,000) compared to traditional private equity funds ($5 million+), making them more accessible to high-net-worth individuals and smaller institutional investors.
Modified Fee Structures: Semi-liquid funds typically feature fee structures that reflect their hybrid nature, often with management fees based on NAV rather than committed capital, and carried interest arrangements that balance liquidity with long-term performance incentives.
Leading Semi-Liquid Fund Examples
Several asset managers have developed notable semi-liquid private equity offerings:
Schroders Capital Semi-Liquid Global Private Equity Fund: Combines primary and secondary private equity investments with an allocation to more liquid strategies, offering quarterly liquidity options to qualified investors.
Schroders Capital Semi-Liquid Energy Transition Fund: Focuses on investments supporting the global transition to renewable energy, with a hybrid structure offering improved liquidity compared to traditional energy private equity funds.
Hamilton Lane Private Assets Fund: A semi-liquid structure providing access to private equity, private credit, and secondary investments with quarterly liquidity features.
Pantheon Private Equity Opportunities Fund: Offers exposure to a diversified private equity portfolio through a semi-liquid structure with periodic liquidity windows.
Partners Group Private Equity Opportunities: Combines direct investments, secondaries, and primaries in a structure designed to provide quarterly liquidity while maintaining private market exposure.
Advantages of Semi-Liquid Fund Structures
Improved Liquidity Profile: The most obvious benefit is enhanced liquidity compared to traditional private equity, making these funds more suitable for investors who cannot commit capital for 10+ years.
Broader Investment Universe: The hybrid approach allows managers to access a wider range of opportunities across the liquidity spectrum.
Portfolio Construction Flexibility: The semi-liquid structure enables managers to maintain strategic allocations and adjust to market conditions more dynamically than traditional PE funds.
Reduced J-Curve Effect: By incorporating secondary investments and more mature assets, semi-liquid funds can potentially mitigate the negative returns typically experienced in early years of private equity investing.
Enhanced Reporting and Transparency: These funds typically offer more frequent valuation and performance reporting than traditional private equity vehicles.
Challenges and Considerations
Liquidity-Return Trade-off: The enhanced liquidity features may come at the cost of potentially lower returns compared to traditional private equity, as managers must maintain some liquid allocations.
Complexity of Structure: Semi-liquid funds require sophisticated portfolio and liquidity management to balance investor redemptions with long-term private market investments.
Redemption Restrictions: While offering improved liquidity, these funds still maintain redemption gates, notice periods, and potential suspensions during market stress to protect all investors.
Valuation Challenges: More frequent valuations of private assets can be challenging and may not fully reflect market conditions during periods of volatility.
Is a Semi-Liquid Fund Right for Your Portfolio?
Semi-liquid private equity funds are particularly suitable for:
- Investors seeking private market exposure with moderate liquidity needs
- High-net-worth individuals who want private equity access but cannot meet traditional minimum investments
- Family offices looking to balance liquidity and returns
- Smaller institutional investors seeking private market diversification
- Investors who want to reduce the administrative burden of managing multiple closed-end commitments
These structures offer a compelling middle ground for investors who are willing to accept some illiquidity in exchange for potentially higher returns than public markets, but who cannot commit to the decade-plus lockups of traditional private equity funds.
Semi-Liquid vs. Traditional Private Equity Funds: Key Differences
Understanding how semi-liquid funds compare to traditional private equity helps investors determine which structure best meets their needs:
| Feature | Semi-Liquid Funds | Traditional PE Funds |
|---|---|---|
| Liquidity | Quarterly/semi-annual redemption windows | Distributions only as investments are realized |
| Investment Period | Continuous | Typically 4-6 years |
| Fund Life | Often perpetual or long-dated | Fixed (10-12 years) |
| Minimum Investment | Lower ($100K-$500K typical) | Higher ($5M+ typical) |
| Portfolio Construction | Hybrid of direct PE and more liquid assets | Primarily direct investments |
| Valuation Frequency | Quarterly | Annual or semi-annual |
| Fee Structure | Often on NAV | On committed/invested capital |
As private markets continue to evolve, semi-liquid fund structures represent an important innovation that expands access to private equity beyond the traditional institutional investor base.