By Adele Kohler, CFA, Managing Director, Americas, CAIA Association
The vehicles designed to broaden access to private markets are now being tested against the practical realities of the liquidity they offer. In the first quarter of 2026, a concentration of retail redemptions across several large business development companies (BDCs) and interval fund structures led a number of managers, including Blackstone, BlackRock, Blue Owl, Ares, and others, to activate gating mechanisms embedded in their fund designs. Calling this episode a credit collapse would be an overstatement. It is more accurately understood as the manifestation of a structural mismatch that has long existed, but had not previously been tested at scale.
Retail capital has increasingly flowed into strategies that offer periodic redemption features, while the underlying assets themselves often require months or years to liquidate at fair value. When redemption pressure rises, those tensions become visible. What has unfolded is less a failure than a stress test of whether the promises implied by fund structures align with how they function under less forgiving conditions.
Why Semi‑Liquids Became So Compelling
Over the past five years, private market strategies have proliferated in wealth wrappers often referred to generically as “semi‑liquid”. These structures were designed to make private assets more accessible by navigating regulatory constraints that traditionally limited participation, including private placement rules tied to investor sophistication, high minimum investment thresholds, and prolonged capital lock‑ups.
Their appeal lies in features such as intermittent liquidity windows, lower minimum investments, and evergreen capital structures that avoid the decade‑long commitment typical of closed‑end private funds. Assets in these vehicles have grown steadily, reinforcing that demand is real and that product market fit exists. Interval and tender‑offer funds in the United States alone expanded meaningfully over the past decade, and fundraising momentum accelerated again in 2024 and 2025. The numbers validated what product teams and distributors already believed: investors wanted access.
What the growth figures did not fully capture was how much complexity was accumulating behind the wrapper.
Suitability and Expectations
Semi‑liquid products were originally designed with a specific investor profile in mind: sophisticated, high net worth individuals who could tolerate illiquidity risk over a multi‑year horizon and evaluate the trade‑offs involved. In practice, the economics of the wealth channel and strong investor demand have broadened distribution beyond that initial target audience, raising legitimate questions about suitability and expectation‑setting.
The issue is not the structures themselves. It is the gap between what semi‑liquid means in a prospectus and how that term is sometimes understood by investors, and occasionally by advisors, in practice. Quarterly redemption windows can sound flexible, but they should not be mistaken for true liquidity. A five percent quarterly cap means that a full exit can take years. Redemption queues, gating mechanisms, and adjustments to net asset value are not anomalies. They are core features of these vehicles. Yet they can still surprise investors when the limits of liquidity were not fully appreciated at the point of allocation.
Regulators have become increasingly attentive to these dynamics, particularly as semi‑liquid strategies continue to move closer to the retail end of the wealth spectrum. Episodes such as the BREIT redemption limits in 2022, the restructuring of OBDC II in early 2026, and more recent waves of redemption pressure across private credit evergreen funds suggest a recurring pattern. Periods of stress tend to expose gaps in investor understanding and operational readiness, even when structures function as designed.
The Operational Reality Beneath the Surface
If suitability represents the public conversation around semi‑liquid products, operational resilience is the quieter but equally important one.
Managing a semi‑liquid fund is operationally demanding in ways that are easy to underestimate until conditions become more challenging. Liquidity windows require precise governance and disciplined execution. Redemption queues must be administered equitably. Valuations must reflect assets that are not marked daily. Investor communications must be timely, accurate, and clear, especially when constraints are exercised.
Compounding these demands is a set of interdependent variables that are difficult to predict with precision. Realizations and maturities, net asset value movements, subscription flows, and redemption requests can shift simultaneously. Together, they reduce a manager’s ability to model the scenarios they will face when a liquidity window opens. In benign markets, these dynamics are manageable. Under stress, when redemption demand increases and pricing becomes less favorable while valuations grow more contested, those challenges intensify materially.
Many of the systems supporting these products were not originally built for this level of complexity. Legacy fund administration platforms, custody infrastructure, and transfer agency technology evolved in an era of simpler structures and less frequent valuation. Semi‑liquid funds require more robust data integration, clearer reporting for advisors, and compliance frameworks capable of supporting heightened scrutiny around suitability and best‑interest standards. Bridging that gap requires sustained investment that is often less visible than product launches but no less critical.
As CAIA has noted in prior research and industry engagement, the ability to operate semi‑liquid products safely and at scale is uneven across the industry. In some cases, emphasis has leaned more heavily toward wrapper design and distribution strategy than toward the operational infrastructure required to support these vehicles through periods of market stress.
Are Today’s Structures Built to Last?
Running alongside the growth of semi‑liquid vehicles is a parallel evolution in financial infrastructure that may ultimately reshape how liquidity itself is delivered. Tokenization and related innovations, including blockchain‑enabled settlement, digital fund administration, programmable secondary trading, and on‑chain identity verification, are moving steadily from experimentation toward implementation.
If these systems mature as their proponents expect, liquidity may become less a feature of product structure and more a characteristic of underlying infrastructure. Processes that currently define the operational burden of semi‑liquid funds, such as redemption queues, manual reconciliation, and fragmented reporting, could become simpler engineering problems rather than governance challenges.
This raises an important strategic question for the industry – and managers in particular. Is capital being over‑allocated to incremental innovation in fund wrappers while under‑invested in the architecture that could fundamentally change how private market exposure is accessed and managed?
What Comes Next
Semi‑liquid vehicles address a genuine market need and, in many cases, do so effectively. However, not all products are created equally. Some managers have built offerings supported by strong governance, clear investor education, and infrastructure designed for complexity. Others encounter limitations only once products scale or face market stress.
Looking ahead, asset managers and wealth platforms would benefit from focusing on three priorities simultaneously. First, strengthening governance and liquidity management frameworks before the next stress event occurs, not in response to it. Second, investing in operational infrastructure with the same seriousness applied to product design and distribution. The back office is not merely a cost center. It is a core component of risk management. Third, treating advisor and investor education as a prerequisite for distribution rather than an afterthought.
At the same time, firms should evaluate tokenization not as an abstract future concept, but as a strategic capability with real capital and timelines attached.
The Question the Industry Must Answer
Semi‑liquid products may ultimately prove to be a durable bridge that connects individual investors to private markets responsibly and at scale. They may also prove to be a transitional solution, effective within certain conditions but limited by structural assumptions that require rethinking.
Which outcome prevails will depend less on product innovation alone and more on how seriously operational resilience, suitability, and governance are treated alongside growth and fundraising ambitions. The market has clearly affirmed demand. Earning and sustaining the trust that demand implies remains the more complex task, and one that is still unfolding.
About the Contributor
Adele Kohler, CFA, joined CAIA Association in 2025 as its first Managing Director of the Americas. She leads the Association’s efforts across Canada, the United States, and Latin America, some of the largest and most dynamic capital markets in the world, advancing CAIA’s Vision 2035 and helping to redefine what it means to be an investment professional in a world where everything is now an alternative.
With over 25 years of leadership in global asset management, Adele brings deep expertise across both passive and active strategies, spanning traditional and alternative asset classes. Her work has consistently focused on bringing innovation to market—designing, developing, and scaling investment solutions that meet the evolving demands of allocators, institutions, and advisors. At Wellington Management and State Street Global Advisors, Adele led product innovation across more than 250 strategies, launched transformational initiatives in private markets, and helped pioneer new structures in SMAs and ETFs that bridged the gap between institutional and wealth clients.
Her ability to think across asset classes and investment disciplines positions her as a key driver of CAIA’s educational programming, Member experience, and thought leadership strategy as modern portfolios continue to evolve.
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