Semiliquid fund label under scrutiny as 2026 liquidity stress tests private credit market

The private credit industry is grappling with a terminology debate as wealthy investors face significant outflows and redemption caps in semiliquid funds throughout 2026. This period has served as a major stress test for the $1.8 trillion market, putting fund managers such as Blue Owl Capital and Blackstone on the defensive. While some executives praise the essential design of these vehicles as a crucial source of fee-earning revenue for the alternatives industry, others are questioning whether the current labeling adequately informs investors about the limited liquidity rules governing these products.

The dispute has intensified over whether the term "semiliquid" is an ill-conceived and misleading name for products that lack the full liquidity profile of mutual funds and exchange-traded funds. Franklin Templeton CEO Jenny Johnson stated at an investment conference that private markets are inherently illiquid, suggesting the label may be unnecessary. Similarly, EQT CEO Per Franzén predicted at the same event that the word "semiliquid" would disappear from industry terminology.

Critics argue that the debate over the label itself may be missing the mark, noting that the narrative of investors being caught off guard by liquidity limits remains largely unsubstantiated. Surveys by Morningstar and others consistently show that registered investment advisers, who typically distribute these funds, have limited familiarity with semiliquid fund structures. Much of the tension stems from conflating the partly liquid form of the product container with the illiquid assets inside it, with some arguing the term overstates the exit options available to investors.

In practice, semiliquid funds typically cap redemptions at 5% of the fund value, and many fund managers' buybacks are subject to board discretion. Throughout 2026, a liquidity backlog has accumulated across the private credit market as investors attempt to cash out. Bryan Armour, director of Morningstar's ETF and semiliquid research, noted that the gating on redemptions is working as intended to protect existing investors from forced selling.

Morningstar, the parent company of PitchBook, has committed to retaining the "semiliquid" label as general practice for fund structures that are less than fully liquid. The company has detailed the landscape of these products in its annual State of Semiliquid Funds report. However, critics suggest that the labeling problem is clearer in other marketing shorthand, such as "periodic liquidity" or "regular redemption opportunities," which may mislead retail investors by highlighting comforting terms and conditions.

The 2026 liquidity crunch has highlighted the differences between retail clients and large institutional investors. As the industry reckons with these distinctions, the debate over terminology continues, with some suggesting that dropping the semiliquid label will not erase the perception problems stemming from caps on redemptions. Advisers and clients will still need to familiarise themselves with the terms and conditions attached to any investment, regardless of the label used.