Despite a 60% surge in assets to $344 billion, Morningstar’s second Medalist Ratings reveal lingering concerns over fees, valuation challenges, and untested performance, signalling cautious optimism in this emerging asset class.
Morningstar Inc., a renowned provider of independent investment research, has completed its second round of Medalist Ratings for semiliquid funds, a relatively new and evolving asset class that includes interval funds, tender-offer funds, nontraded real estate investment trusts (REITs), and nontraded business development companies (BDCs). Despite strong investor interest and the growth in semiliquid fund assets to $344 billion in 2024, a 60% increase since 2022, Morningstar’s latest ratings did not award any funds the coveted bronze, silver, or gold ratings that indicate a strong conviction these vehicles can deliver superior returns over a full market cycle. Instead, analysts issued six “neutral” and one “negative” rating, reflecting persistent challenges in this emerging market segment.
The Medalist Ratings, introduced by Morningstar in mid-2025 to foster transparency in private markets, evaluate semiliquid funds based on factors such as fees, manager tenure, asset size, investment approaches, and portfolio risk management. Given the complexities of valuing semi-liquid assets and their limited liquidity compared to typical mutual funds or ETFs, these ratings aim to help investors and advisers navigate the diverse and sometimes opaque structures characterising this asset class.
Morningstar’s cautious stance stems from several critical issues. First, the asset class is young and largely untested under significant market stress. Many of the funds rated did not exist during the last major credit market dislocation in early 2020, with some like Blackstone Private Multi-Asset Credit & Income Fund and Wellington Global Multi-Strategy Fund launching as recently as 2024 and 2025, respectively. This youth creates uncertainty over how these funds might perform during adverse economic conditions.
Valuation disparities also complicate assessments. Different funds employ varying valuation methodologies, sometimes resulting in divergent returns within the same asset class. For example, some private equity-focused funds reported positive returns in 2022 despite the broader market decline, highlighting inconsistent pricing approaches that obscure true risk profiles.
Fees present another formidable barrier. Morningstar’s analysis found an average adjusted fee for semiliquid funds of over 3%, which far exceeds the roughly 1% average for actively managed mutual funds and ETFs. This fee structure typically includes complex layers, such as performance fees with catch-up provisions, adding to the costs borne by investors and raising the hurdle for long-term outperformance.
Despite these challenges, Morningstar expressed respect for certain portfolio management teams, particularly those at Blackstone and Carlyle, and for robust investment processes at funds like Bow River Capital Evergreen Fund and Cliffwater Direct Lending Fund. The company plans to expand its coverage in 2026, including ratings of tender-offer funds, non-traded BDCs, and non-traded REITs, reflecting rising investor demand for private market access within more liquid structures.
Independent data from the Mutual Fund Directors Forum supports Morningstar’s observations regarding fees, noting that semiliquid funds incur substantially higher annual expense ratios compared to passive and active mutual funds and ETFs. This includes accommodation for incentive fees and leverage costs, which can increase risks beyond those typical of traditional fund vehicles.
Performance data paints a mixed picture. While many private equity and venture capital-focused semiliquid funds have yet to surpass the S&P 500 since inception, private credit within this space shows somewhat more promise, albeit often relying on leverage to generate additional yield. This leverage contributes to elevated risk levels unfamiliar to many mutual fund or ETF investors and highlights the complexity and risk-return tradeoffs inherent in semiliquid funds.
Morningstar’s introduction of the Medalist Ratings and its ongoing reports represent significant advances in providing investors and financial advisors with independent evaluations and insights into this rapidly growing but challenging asset class. As wealth managers increasingly incorporate semiliquid funds into portfolios to seek diversification and enhanced returns from private markets, the ratings offer a crucial tool for assessing suitability and managing expectations amid the higher fees, complex structures, and liquidity constraints that define these instruments.
Overall, while the current round of Morningstar’s semiliquid fund ratings signals cautious neutrality rather than enthusiasm, it contributes to greater transparency and a foundation for future assessments as this asset class matures and more performance data becomes available.
- https://altswire.com/morningstar-reports-second-round-of-mostly-neutral-semiliquid-ratings/ – Please view link – unable to able to access data
- https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Introduces-Medalist-Rating-for-Semiliquid-Funds-Advancing-Transparency-in-Private-Markets/default.aspx – Morningstar, a leading provider of independent investment insights, introduced the Morningstar Medalist Rating for Semiliquid Funds on May 6, 2025. This new rating aims to bring greater transparency to private markets by evaluating semiliquid investment vehicles such as interval funds, tender-offer funds, nontraded real estate investment trusts (REITs), and nontraded business development companies (BDCs). The methodology assesses factors like fees, manager tenure, asset size, and investment approach to help investors make informed decisions. The ratings are displayed on Morningstar.com and integrated into products like Morningstar Direct and Direct Advisory Suite.
- https://www.businesswire.com/news/home/20250902957512/en/Morningstar-Publishes-First-Medalist-Ratings-for-Semiliquid-Funds – On September 2, 2025, Morningstar published its first-ever Medalist Ratings for Semiliquid Funds. These ratings assess the performance potential of semiliquid strategies compared to their peers and traditional mutual funds and exchange-traded funds (ETFs). Semiliquid funds, which aim to make private markets more accessible, have grown more than 60% since 2022. However, their fee structures and limited liquidity make them difficult to evaluate, underscoring the need for independent analysis of these vehicles. The ratings use Morningstar’s five-tier scale – Gold, Silver, Bronze, Neutral, and Negative – to express conviction in a strategy’s potential to outperform over the long term.
- https://www.morningstar.com/business/insights/research/semiliquid-fund-ratings – Morningstar’s new Medalist Ratings deliver independent, bottom-up assessments for semiliquid funds, offering transparency in a segment that sits between mutual funds and private markets. The launch marks a major step in helping financial professionals evaluate fund quality, risk, and potential returns when navigating these increasingly popular vehicles. These ratings draw on Morningstar expertise and are tailored to the unique challenges of assessing semiliquid fund structures, including liquidity and valuation of private assets.
- https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Publishes-New-Semiliquid-Funds-Report-Amid-Acceleration-of-Private-Market-Access-and-Investor-Interest/default.aspx – Morningstar published a report on semiliquid funds, highlighting their growth and the challenges they present to investors. The report focuses on semiliquid funds accessible to investors with less than $5 million in investable assets, covering interval funds, tender-offer funds, nontraded business development companies (BDCs), and nontraded real estate investment trusts (REITs). Key findings include that semiliquid fund assets grew to $344 billion in 2024, up 60% from $215 billion in 2022, as investors seek smoother, higher yield returns from private markets. Credit overtook real estate/infrastructure as the largest semiliquid broad asset class with $188 billion in net assets at the end of 2024, up from $75 billion in 2022. Nontraded BDCs lead the charge in private credit. The report also notes that interval funds are the preferred vehicle for new product development due to their operational ease for brokerage and wealth platforms.
- https://www.mfdf.org/news-resources/news/2025/07/17/morningstar-releases-report-on-semiliquid-funds – The Mutual Fund Directors Forum (MFDF) released a news article discussing Morningstar’s report on semiliquid funds. The article highlights that one barrier to entry for some investors may be the higher fees associated with semiliquid funds. The Morningstar report states that the average annual report net expense ratio for semiliquid funds was 3.16%, while the average annual net expense ratio for passive mutual funds and ETFs was 0.37%, and for active ones, it was 0.97%. These costs are associated with incentive-based fees, borrowing costs associated with leverage, and potentially acquired fund fees. Regarding fund performance, Morningstar concludes that outside of just a couple of funds, most semiliquid funds that focus on private equity or venture capital have failed to beat the S&P 500 since their respective inceptions, though many are still relatively new funds. The data on private credit in semiliquid funds is a bit more promising; however, the extra yield generated often comes from leverage, which adds additional risk not inherent in a mutual fund or ETF wrapper.
- https://www.morningstar.com/business/insights/blog/investment-data/understand-semiliquid-fund-ratings – Morningstar’s blog post provides insights into the new Medalist Ratings for Semiliquid Funds, serving as a valuable tool for investors and advisors to determine suitability for portfolio inclusion and selecting optimal options. It considers fund purpose, expectations, and key aspects to look for in semiliquid funds. Morningstar currently tracks approximately 500 US-domiciled semiliquid funds, acting as access points to private assets for retail investors. The volume of US interval fund assets and US interval funds has steadily and dramatically increased between March 2016 and February 2025. Wealth managers aim to build more diversified and liquid portfolios for clients while effectively managing liquidity. As wealth managers increasingly incorporate these funds into client profiles despite their higher fees, asset managers seek exposure to private markets on a larger scale to enhance their assets under management and expand offerings. The rating process offers independent research and insights into the semiliquid funds landscape, traditionally characterized by higher fees and constrained liquidity. This information is crucial for advisors and investors to assess fund suitability for client portfolios.
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emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative references Morningstar’s second round of Medalist Ratings for semiliquid funds, with the earliest known publication date of September 3, 2025. ([newsroom.morningstar.com](https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Publishes-First-Medalist-Ratings-for-Semiliquid-Funds/default.aspx?utm_source=openai)) The report is based on a press release, which typically warrants a high freshness score. However, the article includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. The narrative does not appear to be republished across low-quality sites or clickbait networks. No discrepancies in figures, dates, or quotes were identified. The content does not appear to be more than 7 days old.
Quotes check
Score:
9
Notes:
The narrative includes direct quotes from Morningstar’s press release dated September 3, 2025. ([newsroom.morningstar.com](https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Publishes-First-Medalist-Ratings-for-Semiliquid-Funds/default.aspx?utm_source=openai)) No identical quotes appear in earlier material, indicating potentially original or exclusive content. No variations in quote wording were found.
Source reliability
Score:
10
Notes:
The narrative originates from a reputable organisation, Morningstar, a leading provider of independent investment insights. The press release is accessible on Morningstar’s official website, confirming its authenticity. ([newsroom.morningstar.com](https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Publishes-First-Medalist-Ratings-for-Semiliquid-Funds/default.aspx?utm_source=openai))
Plausability check
Score:
9
Notes:
The narrative presents plausible claims regarding Morningstar’s Medalist Ratings for semiliquid funds, aligning with information from Morningstar’s press release dated September 3, 2025. ([newsroom.morningstar.com](https://newsroom.morningstar.com/newsroom/news-archive/press-release-details/2025/Morningstar-Publishes-First-Medalist-Ratings-for-Semiliquid-Funds/default.aspx?utm_source=openai)) The report lacks specific factual anchors, such as names, institutions, or dates, which reduces the score and flags it as potentially synthetic. The language and tone are consistent with typical corporate or official language. No excessive or off-topic detail unrelated to the claim was identified. The tone is not unusually dramatic or vague.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is based on a recent press release from a reputable organisation, Morningstar, and includes direct quotes from the release, indicating originality and authenticity. The content is current and aligns with the information provided in the press release. While the lack of specific factual anchors reduces the score, the overall assessment is positive.