The private credit landscape is being reshaped by semi-liquid fund structures, which offer flexibility and accessibility to a broader investor base, addressing growing demand for liquidity and diversification.
At the same time, these structures also introduce unique valuation challenges for fund managers. It’s helpful to review the growth of semi-liquid funds in credit markets and understand how Kroll’s Private Capital Markets Platform helps managers optimize fund performance and foster investor confidence.
Semi-liquid funds have rapidly gained traction in private credit because of their blend of liquidity and long-term investment horizons. Notably, these features are part of why private credit is becoming a more attractive space for investors.
According to Preqin, private markets assets under management (AUM) are projected to exceed $30 trillion globally by 2030, underscoring the expansion of alternative investments. Within the U.S., private credit—a $1.7 trillion market—has been the fastest-growing segment, driven by investor demand for features like regular income, periodic liquidity and diversification.
These structures appeal to wealth investors and intermediaries alike, simplifying the process of maintaining allocations while offering greater flexibility than traditional closed-end funds. However, their operational and valuation complexities require robust systems to ensure fairness and mitigate risks, particularly around pricing and liquidity management. [Source: Morgan Stanley]
Kroll’s Private Capital Markets Platform is designed to address the complexities of managing semi-liquid fund structures. Leveraging decades of valuation expertise, it equips fund managers with tools to improve operational efficiency and decision-making, while maintaining transparency and fairness. Here are a few ways the PCM platform helps navigate semi-liquid fund structures:
1. Efficient Data Collection and Organization
Semi-liquid funds generate vast amounts of data due to their ongoing subscription and redemption cycles. Kroll’s platform simplifies data collection across financial statements, credit agreements and portfolio documents, providing fund managers with a centralized, up-to-date dataset. This ensures that valuation inputs are both comprehensive and reliable.
2. Flexible and Scalable Valuation Modeling
Accurate and auditable valuations are critical in semi-liquid structures. The Private Capital Markets platform allows managers to conduct scenario analyses and adjust valuation models across portfolios seamlessly. This capability is especially valuable for managing liquidity sleeves, which semi-liquid funds often maintain to accommodate redemptions and mitigate cash drag. [Source: Morgan Stanley]
3. Real-Time Portfolio Insights
By consolidating historical and current valuation data in a single system, the platform enables fund managers to monitor portfolio trends, identify risks and answer investor queries promptly. This enhances both operational readiness and investor confidence, as stakeholders gain access to consistent and transparent valuation metrics.
4. Operational Simplicity and Strategic Control
One of the primary operational challenges of semi-liquid funds is managing liquidity while also meeting investor demands. Using traditional methods to manage these processes can be resource intensive and can create the risk of potential errors that negatively affect an investor’s outcomes. Kroll’s platform automates routine workflows, allowing fund managers to focus on strategic decisions rather than deal with complicated manual processes.
In addition, the platform’s standardized approach to valuation ensures that capital is managed with rigor and precision, meeting the expectations of institutional-grade investors. Importantly, wealth investors are increasingly being drawn to private credit, with allocations projected to grow by $500 billion to $1.3 trillion in the U.S. by 2025, according to McKinsey.
Advancing the Semi-Liquid Revolution
Although the growth of semi-liquid fund structures in private credit offers fund managers new opportunities, it also presents new challenges. Managers can overcome these challenges with Kroll’s Private Capital Markets Platform, allowing them to navigate the complexities of valuation, liquidity management and operational efficiency with confidence. Contact us to learn more.
