Morgan Stanley | Semi-Liquid Private Credit Funds Emerge as Key Growth Driver in Alternatives
- Editor
- Jan 8
- 1 min read
Updated: Jan 8
What's New:
Morgan Stanley Investment Management reports that innovative "semi-liquid" fund structures are revolutionizing private market access for wealth management investors, with private credit emerging as the fastest-growing segment. These new structures offer regular redemption options and lower investment minimums, effectively democratizing access to previously institutional-only alternative investments.
By The Numbers:
Alternative assets under management projected to reach $29.2 trillion by 2029, up 74% from 2016
Private markets allocations expected to grow to 3-5% of U.S. wealth management assets by 2025, from 2% in 2020
Private credit market size in U.S. reaches approximately $1.7 trillion in assets under management and committed dry powder
Key Trends to Watch:
Rapid proliferation of semi-liquid fund launches, particularly in private credit, with 101 launches during 2020-2023 compared to 71 in 2015-2019
Growing adoption of new fund structures including BDCs, ELTIFs, interval funds, and tender offers across private markets
Shift from traditional closed-end fund structures to more flexible semi-liquid options offering quarterly redemptions
Overall Sentiment:
Optimistic about continued growth trajectory, viewing semi-liquid vehicles as "only the start of a longer-term secular trend across private markets"
Bullish Factors:
Private credit's suitability for semi-liquid structures due to contractual payouts, known liquidity through principal return, and consistent valuation metrics
Bearish Factors:
Concerns about potential "cash drag" on returns from maintaining liquidity sleeves and the need to carefully manage redemption risks through disciplined asset sales
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