Semiliquid Private Funds Aren't as Unique as You Think

What's New

Morningstar's new Manager Research report, "How Private Is Your Private Portfolio?", reveals that semiliquid private asset funds marketed as highly differentiated vehicles share striking portfolio overlap, heavy software concentration, and liquidity dynamics that make fees the real differentiator for long term performance.

Why It Matters

As institutional and retail capital floods into semiliquid private credit and equity vehicles, the assumption that these funds offer truly proprietary deal flow and uncorrelated exposure is being challenged by the data. Investors paying premium fees for what they believe is exclusive access may, in many cases, be buying the same underlying businesses available through cheaper public market alternatives.

Big Picture Drivers

• Overlap: Over a third of direct lending category assets sit in companies held by five or more unique funds, undermining the "exclusive origination" narrative that managers use to justify premium pricing.

• Transparency: Private equity fund of funds structures and co investment vehicles obscure underlying economic exposures, meaning the true overlap is almost certainly higher than reported figures suggest.

• Concentration: The top five industry exposures in semiliquid funds account for roughly 55% of total assets versus just over 40% in the S&P 500, introducing sector risks that conflict with the diversification pitch.

• Public parallels: At least 15% of semiliquid direct lending assets are in companies that also appear in bank loan funds, and mega unicorns like SpaceX, OpenAI, and Anthropic are accessible through mutual funds and ETFs.

• Software vulnerability: True software exposure across semiliquid portfolios likely approaches one third of all assets when multiple classification systems are applied, creating concentrated AI disruption risk.

By The Numbers

• ~27% of invested assets across the 500 largest semiliquid holdings are in software companies, rising to roughly a third under broader definitions.

• ~20% average two way issuer overlap between any two private credit funds in the top 10 peer set.

• ~15% average cash allocation in private equity semiliquid funds, nearly double the level held by direct lending funds.

• 4 to 5 years weighted average maturity for private credit portfolios, with few loans maturing before 2028.

• 80% of bank loan fund assets (dollar weighted) sit in issuers that also appear in semiliquid direct lending portfolios.

Key Trends to Watch

• Fee pressure: As portfolio overlap data becomes more transparent, the case for premium fee structures weakens, and managers will need to demonstrate genuine origination alpha to retain capital.

• Software maturity wall: The majority of software loans mature between 2029 and 2030, and if AI disruption slows early repayments, the effective life of these loans could stretch closer to contractual maturity, straining fund liquidity.

• Redemption risk: Rising redemption requests combined with limited near term loan maturities create a liquidity mismatch that could force managers into suboptimal reinvestment decisions or asset sales.

• Classification arbitrage: The gap between narrow and broad software definitions reveals that traditional industry codes materially understate true technology exposure, meaning investors may be more concentrated than their reporting suggests.

The Wrap The data makes a compelling case that semiliquid funds are not the bespoke, uncorrelated portfolios their marketing suggests. They behave more like the less liquid corners of public markets. With significant software concentration, rising redemptions, and demonstrable overlap across peers, the real differentiators come down to fees, liquidity management, and whether a manager can genuinely originate deals that peers cannot access. Investors should be scrutinizing holdings transparency and fee structures with the same rigor they apply to public fund selection.

Read Full Report How Private Is Your Private Portfolio? (Morningstar, April 2026)