Private Credit Liquidity: What “Semi-Liquid” Really Means

A semi-liquid fund doesn’t promise that you can get your money back every quarter. It promises that you can ask, up to a limit.

That distinction was easy to overlook while redemption requests were small. In 2026, it moved to the center of the private credit conversation, to the point that the SEC addressed it directly in a September rule proposal.¹ Here is what the term actually describes, what the data shows, and what remains unsettled.

What “Semi-Liquid” Actually Means

“Semi-liquid” is a market term, not a legal category. It describes funds that hold assets that cannot be sol

d quickly, such as privately negotiated loans, while giving investors periodic opportunities to sell shares back to the fund at net asset value (NAV). The mechanics differ by structure.

Interval funds. Under SEC Rule 23c-3, an interval fund adopts a fundamental policy to make repurchase offers at NAV every three, six, or twelve months. The board sets the offer amount, between 5% and 25% of shares outstanding, and the fund must accept repurchases up to that amount. If requests exceed it, the fund can repurchase up to an additional 2%; beyond that, requests are filled pro rata. While an offer is pending, the fund must hold liquid assets equal to at least 100% of the offer amount.¹

Non-traded BDCs and tender-offer funds. These repurchase shares through tender offers the fund chooses to make. One BDC prospectus filed with the SEC this year states that BDCs may repurchase securities only through tender offers, with no requirement to conduct them or to maintain a particular level of liquidity to fund them.² Investors in these funds typically face limits of around 5% of NAV per quarter,³ which Reuters describes as the customary threshold for such vehicles.⁴

The SEC describes the trade-off plainly: the fund offers exposure to less liquid assets together with a certain amount of liquidity, but investors can generally tender only periodically and in amounts the fund offers.¹ The interval fund market alone grew from 58 funds and $38 billion in assets in 2020 to 139 funds and $101 billion in 2025, with credit strategies making up about 55% of the total.¹

Figure 1: “Four ways to hold an investment.”

Private Credit Liquidity: What the Structure Actually Promises

In practice, private credit liquidity under these structures comes down to three things: a schedule, a cap, and a price.

The schedule is the repurchase window, usually quarterly. The cap is the limit on how much the fund buys back. Fund prospectuses describe what happens when requests exceed it: shareholders who tender may have only a pro rata portion repurchased, and must resubmit for the remainder in a later offer.⁵ ⁶ The price is NAV, the fund’s own valuation, not a market price.

That last point carries weight. The Congressional Research Service notes that because earlier redeemers are paid at NAV, investors who believe a portfolio’s true value is lower than reported have an incentive to redeem before others, a dynamic it describes as run-like behavior. CRS also notes that some industry participants argue private funds are not designed to offer the liquidity of public funds, given that redemption restrictions are contractual.³

Figure 2:  “Anatomy of an interval fund repurchase offer.”

What 2026 Looked Like

CRS compiled data on ten large non-traded private credit funds in early 2026. For the nine with figures, requests ranged from 7.9% to 41% of the fund, against caps of 5% to 7%. Some funds enforced their caps, while others honored requests beyond them.³

The backdrop, per CRS, included AI-related revenue pressure at software borrowers, valuation downgrades, and rising default risk, with a Fitch measure of the U.S. private credit default rate at 5.8% in January 2026, compared with around 4% for speculative-grade corporate bonds.³

By the third quarter, requests had eased but not disappeared. At one large BDC, investors sought to withdraw about 14.7% of shares, down from 16.8% the prior quarter. The fund repurchased 5% and said the vast majority of requests reflected investors re-tendering unfulfilled requests from prior quarters.⁴ It estimated that investors who sought liquidity during 2026 would have received about 75% of the capital they requested after third-quarter payments.⁴ Another large fund reported requests of 13.1%, down from 14.4%, limited withdrawals to 5%, and said net new demand was about 3% of NAV.⁷

The spread across funds is wide. A fund at a third manager reported third-quarter requests of 2%, down from 3.2%, while another large fund limited withdrawals to 5% after requests of about 16%.⁸ Across the 13 non-traded BDCs that had reported third-quarter figures, requests totaled $9.6 billion, or 10.1% of fund value, down from 11.2% in the prior quarter, according to RA Stanger data.⁹

What Regulators Are Saying

In September, the SEC proposed amendments to Rule 23c-3. The release acknowledges that in early 2026, multiple non-traded BDCs and registered closed-end funds, including several interval funds, saw increased demand to repurchase shares, and that in several cases investors sought to tender more shares than the fund had offered. It also notes that SEC rules require funds to disclose these structural features. The proposal would add flexibility: monthly repurchase intervals, up to two years before a new fund’s first repurchase offer, and a principles-based liquidity standard in place of the requirement to hold liquid assets equal to 100% of the offer amount. It is a proposal open for public comment, not a final rule.¹

Valuation is the other focus. On September 28, the SEC’s chief accountant and the director of its Division of Investment Management issued a staff statement calling for rigor in how private assets, particularly private credit, are valued and how the valuation basis and risks are disclosed.¹⁰ Law firm analysis notes the statement does not create new legal obligations.¹¹

What Remains Unclear

Whether requests keep easing is still open. The funds that reported lower requests expect queues to clear, but both estimates depend on requests staying in line with the third quarter.⁴ ⁷ The SEC’s proposal is not final. The numbers also describe requests and caps, not portfolio quality; the 2% to 16% spread in third-quarter requests shows how much funds differ.

There is also a difference in how the episode is read. CRS observes that the wave of requests suggests some investors may not have fully appreciated these illiquid features, particularly when valuations are uncertain.³ Industry participants point out that the limits are contractual and disclosed.³ Both readings fit the same data.

The Questions the Data Raises

How closely does a fund’s repurchase schedule match the liquidity of its loans and its investors’ time horizons?

What does a quarterly window mean on a day when requests are two or three times the cap?

How are NAVs set and disclosed when investors are tendering at that price?

What I find interesting is how much of the 2026 episode comes down to one word. “Semi-liquid” describes a mechanism: a schedule, a cap, and a price. This year that mechanism met its first broad test, and the data shows what it looks like when requests exceed the cap. The question I would ask of any such vehicle is how its terms line up with the assets it actually holds.

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Sources

¹ U.S. Securities and Exchange Commission, “Interval Fund Modernization; Expansion of Multiple Share Class to Registered Closed-End Management Investment Companies and Business Development Companies,” proposed rule, Release No. 33-11444 (File No. S7-2026-34), September 2026.

² Alternative Credit Income Fund, Form 424B3, supplement dated February 26, 2026 (SEC EDGAR).

³ Congressional Research Service, Private Credit Funds Redemption Restrictions: Market Context and Policy Issues (IN12674), updated April 2, 2026.

⁴ Reuters, “Apollo private credit fund redemption requests ease in third quarter,” September 22, 2026.

⁵ First Trust Alternative Opportunities Fund, Form 486BPOS (SEC EDGAR), 2025.

⁶ BlackRock Credit Strategies Fund, Form 486BPOS (SEC EDGAR), 2021.

⁷ Reuters, “Ares fund withdrawal requests decline as private credit redemptions ease,” September 24, 2026.

⁸ Benzinga, “Goldman’s $18B Private Credit Fund Bucks Redemption Wave — Again,” September 2026.

⁹ RA Stanger data, as reported in Traders Union, “Private credit funds see redemption pressure ease as retail withdrawals slow,” 2026.

¹⁰ SEC, “Statement on Fair Value Measurement and Disclosure Considerations for Private Assets,” September 28, 2026, as reported by American Banker (September 29, 2026) and PYMNTS (September 28, 2026).

¹¹ McDermott Will & Schulte, “SEC calls for rigor in private credit valuation practices, disclosures,” October 1, 2026.