Semi-liquid funds, explained

Written 3 September 2026 · All explainers

How to read the markers. [D] — verified from a source retrieved for this note, listed under Sources. [I] — industry-understood; not formally disclosed by a named party. [S] — our own inference or judgment. Every figure is either sourced or marked as an estimate.

The short version

A “semi-liquid” fund holds assets that cannot be sold on demand — private loans, toll roads, data centres — and offers investors a way out anyway. The way out is never the asset. It is the fund’s own plumbing: cash the loans throw off, new subscriptions, a credit line and, last, selling loans to another buyer. Every wrapper is a set of rules about how much of that plumbing investors may drain, and how often.

The rule that matters is the cap: the largest share of the fund the manager will buy back per window, and what happens to requests above it. In a US interval fund the cap is a legal band of 5% to 25% of outstanding shares per offer, set by Rule 23c-3 under the Investment Company Act of 1940. In a non-traded business development company (BDC) the 5% quarterly cap is the fund’s own policy, which its board can raise or cut. In a European ELTIF 2.0 the cap is a percentage of the fund’s liquid pocket, read off a table in a Commission regulation. In every case, when more people want out than the cap allows, each investor is paid a pro-rata slice at net asset value (NAV) and the rest waits.

That waiting is a queue, not a default. In the first quarter of 2026 the twelve largest US non-traded BDCs received requests averaging 12.1% of shares against 5% caps and paid 53% of the money asked for, all at NAV, while listed BDCs — same loans, different exit — traded at a median 26% discount to NAV. [D — see Sources] The wrapper decides whether you leave at the fund’s mark or at the market’s.

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1. Why the loan cannot be sold on demand

A private loan is a contract between one lender and one borrower. No exchange quotes it, and a buyer must read the credit file first. A stake in a wind farm changes hands after months of due diligence. Selling either quickly means selling to the few buyers who are ready, at whatever price they offer that week. [I]

So a fund that promises liquidity must find the cash elsewhere. Four sources, in the order managers prefer:

1. Cash the portfolio throws off. A typical private loan refinances in about three years, so roughly a third of a lending book turns into cash each year. [D — iCapital]
2. New subscriptions. Cheapest and least reliable: inflows fall in exactly the quarters when requests rise.
3. Borrowing. Blue Owl Credit Income Corp reported $11.3bn of liquidity across cash, undrawn debt and liquid assets at the end of February 2026. [D]
4. Selling assets. The last resort, because it fixes a price. In February 2026 Blue Owl BDCs sold $1.4bn of loans to institutions at 99.7% of par. [D]

The cap exists to protect those four sources. A fund that let everyone out at once would sell loans into a thin market, and the investors who stayed would eat the discount. The cap protects the stayers, which is why every wrapper below has one. [S]

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2. The US interval fund, and its looser cousin

An interval fund is a closed-end fund registered under the 1940 Act that adopts, as a fundamental policy, a promise to buy back shares at set intervals. Rule 23c-3 sets the terms, and they are law, not house style: [D — Rule 23c-3; SEC investor bulletin, 25 September 2020]

• Interval: every 3, 6 or 12 months.
• Offer size: at least 5% and at most 25% of outstanding shares per offer.
• Timing: notice 21 to 42 days before the deadline; price is the NAV struck within 14 days after it; payment within 7 days of pricing.
• Oversubscription: the fund may buy up to an extra 2% of shares, then must reduce every request pro rata.
• Cover: liquid assets equal to at least 100% of the offer amount; repurchase fee of at most 2%.
• Suspension: only in narrow cases (loss of tax status, market closure, inability to value) or with SEC permission.

The Cliffwater Corporate Lending Fund’s offer of 5 February 2026 shows the rule at work: 5% of shares, discretion to add 2%, pro rata above 7%, NAV on 10 March, payment within seven days, no fee. [D] Investors tendered 13.9% of shares; the fund bought 7% and pro-rated the rest. [D — PitchBook, 12 March 2026] That is the interval-fund promise: it can be pro-rated but it cannot be gated — the offer must happen, at the stated size, on the stated date. [D — XA Investments, Q1 2026]

The tender-offer fund is the looser cousin. Also a closed-end fund, it buys shares back through issuer tender offers under Rule 13e-4 of the Securities Exchange Act of 1934, whenever its board chooses. Rule 13e-4 says how a tender must run — open at least 20 business days, pro rata if oversubscribed — but sets no minimum frequency and no minimum or maximum size. [D — Rule 13e-4; Chapman] Most offer 5% a quarter; in law they need not offer anything. They are also more often sold privately to accredited investors. [D — Chapman]

At 31 March 2026 XA Investments counted 173 interval funds and 141 tender-offer funds, with $247bn of net assets between them. [D]

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3. Non-traded BDC versus listed BDC

A BDC is a closed-end fund that elects a special status under the 1940 Act, built for lending to private US companies. [I] The same strategy comes in two exits.

A listed BDC sells its shares once; they then trade on an exchange. The fund never buys them back on demand. You exit by finding a buyer, at whatever price the market sets — above NAV (a premium) or below it (a discount). [D — SEC investor bulletin on closed-end funds; ICI]

A non-traded BDC never lists. It sells shares continuously at NAV and buys them back through quarterly Rule 13e-4 tenders. The cap is the fund’s own policy. Blackstone Private Credit Fund (BCRED), the largest, puts it this way in its 2024 annual report: the fund “may repurchase, in each quarter, up to 5% of the NAV of the Company’s Common Shares outstanding”, at NAV, less a 2% early-repurchase deduction on shares held under a year; and the board “may amend or suspend the share repurchase program at any time”. [D — BCRED 10-K for 2024] Buyers need $250,000 of net worth, or $70,000 of income plus $70,000 of net worth; the minimum ticket is $2,500. [D — BCRED fact sheet, 31 December 2025]

Two things called “5% a quarter” are not the same thing. The interval fund’s 5–25% band is law, per offer, as a share of outstanding shares. The non-traded BDC’s 5% is a board promise: BCRED raised it to 7% in early 2026 and could equally have cut it. [D] Only one is enforceable by a regulator.

Why the listed price sits below NAV while the non-traded fund pays NAV

NAV is the manager’s valuation of loans nobody is trading. The exchange price is what a stranger will pay today for a claim on those loans. When they diverge, the market is disagreeing with the mark. At end-March 2026 the median listed private-credit BDC traded at 0.74 times forward NAV — a 26% discount, the widest since October 2020. [D — LSEG via Reuters, 23 April 2026] PIMCO’s reading in August 2026: listed discounts “reflect scepticism toward reported marks”. [D — PIMCO, 17 August 2026]

Non-traded BDCs kept paying 100% of NAV (98% for early leavers) throughout. So what? The discount is a public estimate of what the private marks may be missing; an investor leaving at NAV is paid a price the listed market will not pay. That is itself a reason to queue, which pushes requests above the cap. The wrapper that pays the higher price is the one that has to ration. [S]

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4. Europe’s ELTIF 2.0

Regulation (EU) 2023/606 rebuilt the European Long-Term Investment Fund and applies from 10 January 2024. It removed the €10,000 minimum ticket and the 10% portfolio limit for retail investors, replacing them with a MiFID II suitability assessment. [D — EUR-Lex] The redemption rules sit in Article 18 and in Commission Delegated Regulation (EU) 2024/2759, the regulatory technical standards (RTS), published on 25 October 2024 and in force from 26 October 2024. [D — EUR-Lex; Norton Rose Fulbright]

Article 18 starts from a default of no redemptions before the fund’s end date, then allows them on five conditions: any minimum holding period has passed; the manager has a redemption policy and liquidity-management tools fit for a long-term strategy; the policy states the procedures; redemptions are limited to a percentage of liquid assets; and excess requests are met pro rata. [D — Reg. 2023/606, Art. 18(2)] The RTS then fixes the numbers:

• Minimum holding period: not required and no length set; if chosen, Article 3 says it should normally cover the fund’s initial investment phase. [D — RTS Art. 3, recital 4]
• Frequency: any, but more often than quarterly must be justified to the national regulator. [D — RTS Art. 5(4)]
• Notice period: any, but under three months must be explained to the regulator. [D — RTS Art. 5(8)]
• The cap: a maximum percentage of the fund’s liquid assets plus its prudently forecast 12-month cash flow — explicitly excluding hoped-for new subscriptions — read from Annex I (by frequency and notice period) or Annex II (by frequency and minimum liquid holding). [D — RTS Art. 5(5)–(6)]
• Anti-dilution tools: the manager “shall not be required but may” adopt levies, swing pricing or redemption fees. ESMA’s December 2023 draft made one mandatory; the adopted text did not. [D — RTS Art. 5(9); ESMA, 19 December 2023]

So what? The ELTIF cap is measured against the liquid pocket, not the whole fund. A quarterly ELTIF holding the Annex II minimum of 20% in liquid assets can pay out at most half of that pocket — 10% of the fund — per quarter, and cannot count new inflows toward it. That is stricter by design than a US non-traded BDC, which may lean on subscriptions. [S — arithmetic on the RTS tables] The wrapper is small but growing: at least €34.0bn across 268 registered ELTIFs at end-2025, up 55% on the year, with 113 launched in 2025. [D — Scope, March 2026]

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5. The gate, worked through

A gate is not a refusal. It is a queue with a fixed service rate. Take a fund of 1,000 shares at $1m each — $1bn — with a 5% quarterly cap, in a quarter when holders of 120 shares (12%) ask out. Assume NAV stays flat and nobody new joins the queue. All numbers are illustrative.

Three points the arithmetic makes:

1. Everyone is paid something; nobody is paid everything. In Q1 each $1m request receives $417,000 at NAV. That is what “pro rata” means.
2. The remainder does not queue automatically. Ares Strategic Income Fund’s tender letter says it plainly: “unfulfilled repurchase requests do not carry over automatically to the next repurchase offer.” [D] The investor must re-tender, alongside whoever else has arrived.
3. The cap shrinks with the fund. 5% of 950 is less than 5% of 1,000; with no inflows, each quarter pays a little less.

If a fresh 12% asks out every quarter, the queue never clears: requests arrive at 12% and leave at 5%, so the backlog grows by about 7% of the fund a quarter and the fill rate falls. Several BDCs were in that regime through 2026. [S — illustrative]

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6. What 2025–2026 showed

Pressure built through late 2025: across the non-traded BDCs in Cliffwater’s index, redemptions rose from 1.6% of NAV in the third quarter to 4.8% in the fourth. [D — CAIA, citing Cliffwater] The first quarter of 2026 broke through the cap.

Across the twelve largest non-traded BDCs, first-quarter requests averaged 12.1% of shares (median 10.1%), about $15bn in total, of which 53.4% was paid. [D — With Intelligence, 30 April 2026] Stanger’s count: $4.9bn raised, $6.9bn of redemptions paid, and “for the first time, more capital left non-listed BDCs in a quarter than came in”. [D — Stanger, 14 May 2026] Second-quarter payouts were $5.9bn, taking the half-year to $12.7bn, while April BDC sales of $1.6bn were down 74% on the year. [D — Stanger, 6 July and 26 May 2026]

Three mechanisms showed themselves that had only been on paper before:

• The board’s cap is elastic both ways. Blackstone lifted BCRED’s cap to 7% in Q1 — “the maximum amount permitted without changing the terms of the repurchase offer” — then held 5% in Q2 and Q3 against requests of about 10%. Apollo never moved off 5%. [D]
• Sponsors can shorten the queue from outside. Blackstone and its employees put $400m into BCRED; Brookfield, Oaktree’s parent, bought 1.7% of Oaktree Strategic Credit Fund’s shares from a tendering investor so every request was met. [D] Neither is an obligation; both were choices.
• The wrapper can be rewritten. Blue Owl’s OBDC II board replaced future tender offers with quarterly return-of-capital distributions to every holder — no queue at all. [D — Blue Owl 8-K, 18 February 2026]

So what? The promise was kept to the letter: every offer ran, every accepted share was paid at NAV, no fund suspended repurchases. What investors discovered was the size of the letter. Stanger’s chairman gave the manager’s view: “The semi-liquid structure allows them to do so on defined terms, protecting the investors who want to stay without forcing distressed sales inside the fund.” [D — Stanger, 6 July 2026] The investor’s view is section 5: at 5% a quarter against 10% of requests, half of each request waits, and the wait compounds.

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Caveats

• Sources disagree on how many BDCs pro-rated in Q1 2026. With Intelligence says seven of the twelve largest; Stanger says five. The universes differ and neither publishes its list. Both are recorded; neither is smoothed.
• BCRED’s size is quoted inconsistently. Reuters and PitchBook give $77–82bn; BCRED’s own fact sheet gives net assets of $47.6bn at 31 December 2025. The larger figures appear to include borrowing.
• The Oaktree figures are as reported by Reuters, reconciling the fund’s 6.8% repurchase and the affiliate’s 1.7% purchase to the 8.5% requested. The fund’s own filing for the quarter was not located.
• Tender-offer fund eligibility is practice, not rule. Chapman says they are “often” privately offered to accredited investors; some are public.
• Whether ELTIFs list is treated as “usually not” [I]. The regulation permits listing; the share that do was not retrieved.
• The section 5 example assumes flat NAV, no inflows and a single cohort. It shows the queue mechanism, not any fund’s outcome.
• The ELTIF market size is a floor. Scope reports “at least” €34.0bn because 30 of the 268 registered funds disclose no volume.
• The claim that widening listed discounts push NAV-exit requests above the cap is [S], our inference from the two price series.
• All fund figures are point-in-time to 3 September 2026 and will be superseded by the next quarter’s tender results.

Sources [D]

All retrieved and confirmed to load on 3 September 2026.

US rules and regulator guidance

• 17 CFR § 270.23c-3 — Legal Information Institute, Cornell — the interval-fund rule: 3/6/12-month intervals, 5–25% band, 21–42 day notice, pricing within 14 days, payment within 7, extra 2% then pro rata, 100% liquid cover, 2% fee cap, suspension grounds.
• Investor Bulletin: Interval Funds — SEC, 25 September 2020 — the 5–25% range and pro-rata treatment in plain language.
• Investor Bulletin: Publicly Traded Closed-End Funds — SEC — market price above or below NAV; premium and discount defined.
• 17 CFR § 240.13e-4 — Legal Information Institute, Cornell — issuer tender offers: open at least 20 business days; pro rata if oversubscribed.
• Interval and Tender Offer Closed-End Funds — Chapman and Cutler LLP — board discretion over timing and amount; commonly 5% quarterly; often privately offered to accredited investors.
• A Guide to Closed-End Funds — Investment Company Institute — shares not redeemable to the fund; interval funds repurchase at NAV under Rule 23c-3.
• Recommendation on private market assets — SEC Investor Advisory Committee, 18 September 2025 — interval and tender-offer funds as the registered route to private assets; proposal for monthly repurchases under Rule 23c-3.

EU rules

• Regulation (EU) 2023/606 — EUR-Lex — applies from 10 January 2024; Article 18 conditions; Article 30 suitability; removal of the €10,000 minimum.
• Commission Delegated Regulation (EU) 2024/2759 — Official Journal, 25 October 2024 — Articles 3, 5(4)–(9) and 13; Annex I and II tables.
• ESMA finalises technical standards under the revised ELTIF regulation — 19 December 2023 — the draft proposed a mandatory anti-dilution tool and a quarterly default.
• ESMA proposes changes to ELTIF technical standards — 22 April 2024 — ESMA’s opinion after the Commission signalled amendments.
• ELTIF Delegated Regulation enters into force — Norton Rose Fulbright — OJ publication 25 October 2024, in force 26 October 2024.
• European Commission responses to ESMA on ELTIF 2.0 — Debevoise & Plimpton, 5 December 2025 — Article 18(2)(d) is a maximum; no amendment to the RTS.
• Scope ELTIF-Studie 2026 — Scope Fund Analysis, 26 March 2026 (German, via fundresearch.de) — at least €34.0bn at end-2025, +55%; 268 registered ELTIFs; 113 new in 2025.

Fund documents (SEC EDGAR unless stated)

• Blackstone Private Credit Fund, Form 10-K for 2024 — repurchase programme wording; 2024 quarterly repurchases of 1.5–1.6% all met in full.
• BCRED fact sheet — Fidelity Institutional, data to 31 December 2025 — suitability standards, $2,500 minimum, net assets $47.6bn.
• BCRED shareholder letter, 4 June 2026 (tender offer exhibit) — Q2 2026 requests about 10%, 5% fulfilled; Q1 met in full at 7%.
• Blue Owl Credit Income Corp, 8-K exhibit, 2 April 2026 — 21.9% requested; 5% fulfilled pro rata, about 23% of each tender; $11.3bn liquidity.
• Blue Owl Capital Corporation II, 8-K exhibit, 18 February 2026 — $1.4bn of loans sold at 99.7% of par; distributions to replace tender offers.
• Ares Strategic Income Fund, tender offer letter, March 2026 — “43.1% of your tender”; unfulfilled requests do not carry over.
• Ares Strategic Income Fund, shareholder update, 24 March 2026 — 11.6% requested; $524.5m paid.
• Cliffwater Corporate Lending Fund, Form N-23C3A, 5 February 2026 — a Rule 23c-3(b) offer: 5%, up to 2% more, pro rata above 7%, NAV, no fee.

Market data and trade press

• XA Investments Q1 2026 report, 31 March 2026 — 173 interval and 141 tender-offer funds, $247bn net assets; “may be subject to proration but cannot be gated”.
• Stanger: quarterly redemptions exceed fundraising for the first time — 14 May 2026 — Q1 2026 sales $4.9bn, redemptions $6.9bn, five BDCs pro-rated.
• Stanger: BDC fundraising declines 74% year-over-year — 26 May 2026 — April 2026 BDC sales $1.6bn.
• Stanger: NAV BDCs return nearly $5.9bn in Q2 and $12.7bn year to date — 6 July 2026 — figures and the Gannon quotation.
• What is actually going on in BDC portfolios — With Intelligence, 30 April 2026 — twelve largest: average 12.1%, median 10.1%, about $15bn requested, 53.4% approved; seven gated.
• Apollo and Ares cap redemptions for non-traded BDCs — With Intelligence — ADS 11.2%, about 45%; ASIF 11.6%, 43.1%.
• Private credit recap: asset managers respond to elevated redemption requests — Investment Executive, 14 April 2026 — the fund-by-fund Q1 2026 table, including OTIC 40.7% and BCRED 7.9%.
• Largest Blackstone BDC hikes share repurchase limit to 7% — PitchBook via Yahoo Finance, 3 March 2026 — $400m Blackstone investment; “maximum amount permitted without changing the terms”.
• Redemption requests at Cliffwater private credit fund total 14% of shares — PitchBook via Yahoo Finance, 12 March 2026 — 13.9% requested, 7% repurchased.
• Oaktree fund meets 8.5% withdrawal requests — Reuters via Investing.com, 27 March 2026 — 6.8% repurchased by the fund, 1.7% bought by Brookfield.
• Blackstone private credit fund maintains 5% cap — Reuters via Investing.com, 3 September 2026 — Q3 2026: about 10% requested, $4.3bn; $77.2bn fund.
• Private credit BDCs trade at deepest NAV discounts in over five years — Private Equity Wire, 23 April 2026 — median price to forward NAV 0.74 at end-March 2026, per LSEG data cited by Reuters.
• What BDC markets are signalling about private credit valuations — PIMCO, 17 August 2026 — discounts reflect scepticism toward marks; spread advantage down from over 300bp to under 100bp.
• BDC redemptions: looking beyond the gates — iCapital, 3 March 2026 — 5% quarterly as industry standard; loan turnover of about a third a year.
• Private credit redemptions, defaults, and wrappers — CAIA Association, 20 April 2026 — Cliffwater index redemptions 1.6% (Q3 2025) to 4.8% (Q4 2025); OTIC 40.7%.