The rise of semi-liquid funds

Semi-liquid private asset funds are gaining momentum. Liam O’Mahony examines how their liquidity, diversification and accessibility could reshape the flow of capital into private assets

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Interest in semi-liquid private asset funds has grown significantly in recent years, appealing to investors after attractive returns and diversification benefits, liquidity and accessibility.

According to Morningstar, assets in funds offering limited liquidity and exposure to private assets, totalled about $344 billion at the end of 2024—up 60 percent from $215 billion at the end of 2022.

State Street is predicting significant capital flows into semi-liquid retail-style funds over the next two years. These more liquid funds are expected to make private market strategies more accessible to a wider range of investors.

Meeting the liquidity challenge

One of the biggest issues facing private asset funds is liquidity, given the nature of the assets held.

Funds adopting private-market strategies have historically used closed-ended structures. That limits their suitability for marketing to most retail investors or those with shorter investment horizons.

Semi-liquid funds offer many more possibilities. Typical structures for these funds include:

  • evergreen funds;
  • interval funds;
  • non-traded business development companies (BDCs);
  • non-traded real estate investment trusts (REITs) in the US;
  • European long-term investment funds (ELTIFs) in the EU; and
  • long-term asset funds (LTAFs) in the UK.

Each structure serves a distinct purpose in balancing access and liquidity for private market investments.

Among these, interval funds have emerged as the dominant format in 2025. They are attracting the most assets due to their predictable redemption features and their suitability for both retail and institutional investors.

They require more frequent valuations to enable interval redemption liquidity, however.

This is likely just the beginning of a significant growth market for the private asset funds industry with growth catalysts including:

  • the reinvigoration of the ELTIF regulation;
  • tokenisation; and
  • the expected uptick in retail investor market participation because of the EU’s Savings and Investment Union (SIU).

The Irish funds industry must capitalise on this opportunity. The Central Bank of Ireland (CBI) is acting with initiative to revamp the Irish alternative investment fund (AIF) market through its Consultation Paper 162 (CP162) on the AIF Rulebook. This will introduce positive changes making it more feasible to establish semi-liquid funds in Ireland.

New requirements with AIFMD II

The rise of semi-liquid funds has coincided with the EU’s introduction of the Alternative Investment Fund Managers Directive (AIFMD II). From early 2026, it imposes multiple requirements upon funds to manage liquidity.

Open-ended UCITS and AIFs must select at least two liquidity management tools (LMTs) and analyse their suitability of the LMT for the fund.

According to the Alternative Investment Managers Association (AIMA), the number of private credit funds offering some form of investor liquidity has risen in 2025 compared to 2023.

In parallel, the amended AIFMD II introduces enhanced requirements for open-ended loan-origination AIFs. These include:

  • detailed liquidity management policies
  • redemption procedures
  • stress testing
  • ongoing monitoring obligations to ensure robust oversight and investor protection.

How Ireland can lead in evergreen funds

With its evolving regulatory landscape and the launch of My Future Fund, Ireland is well-positioned to lead in this space.

By embracing innovation, expanding access and cultivating expertise, the Irish funds industry can play a central role in shaping the future of private asset investing across Europe.

The European Commission has urged Member States to create Savings and Investment Account (SIA) frameworks within a year.

Government will publish a roadmap in early 2026, aimed at simplifying tax rules and supporting retail investment, potentially including ELTIFs, echoing the UK’s move to allow LTAFs in ISAs.

Key actions for the future

1. Understand the scale of change

The rapid expansion of semi-liquid private asset funds marks a pivotal evolution in how both institutional and retail investors access private markets.

With structures such as interval funds, ELTIFs and evergreen formats gaining traction, the industry is poised to democratise private asset investing.

Realising the full potential of this growth will require targeted investment and government support to overcome several key challenges.

2. Design for retail investors

One of the most pressing challenges is the lack of robust distribution channels to reach retail investors.

Despite a growing appetite, many people don’t know about or can’t access private market strategies due to limited advisor education, regulatory constraints and outdated infrastructure.

This gap must be addressed to ensure the benefits of diversification and long-term returns are not confined to institutional portfolios.

3. Invest in talent and trust

Finally, success hinges on talent. The industry must invest in professionals who not only understand the complexities of private markets, but who can also educate and engage the wider public.

Building trust in, and an understanding of, semi-liquid structures is critical to fostering long-term participation.

Liam O’Mahony is Partner at PwC Ireland