Morningstar on Wednesday published its first Morningstar Medalist Ratings for Semiliquid Funds.
The company’s forward-looking, qualitative ratings analyze the performance potential of semiliquid strategies in comparison to their peers, traditional mutual funds and ETFs, Morningstar said.
The goal of semiliquid funds is to make private markets more accessible and include popular vehicles such as interval funds, the company noted.
Semiliquid fund net assets have increased over 60% since 2022, driven by “heightened interest in private credit and private equity,” Morningstar said, pointing to research in a recent Morningstar report. Total net assets in funds offering limited liquidity and exposure to private assets neared $350 billion at the end of 2024.
But Morningstar said Wednesday that semiliquid funds’ fee structures and limited liquidity make them hard to evaluate, underscoring the need for independent analysis.
“Private investments are making their way into retail portfolios, but navigating this complex and evolving market comes with a significant information gap for many investors,” Laura Lutton, Global Head of Manager Research, said in a news release announcing the ratings.
“Private investments are making their way into retail portfolios, but navigating this complex and evolving market comes with a significant information gap for many investors.” – Laura Lutton, Global Head of Manager Research, Morningstar
"The Medalist Rating for Semiliquid Funds takes a measured approach, cutting through the noise to help advisors and investors evaluate whether these products truly belong in a diversified portfolio,” Lutton explained.
The new ratings use Morningstar’s five-tier scale – Gold, Silver, Bronze, Neutral and Negative – to “express conviction in a strategy’s potential to outperform over the long term,” according to the company.
The initial funds were selected to provide a cross-section of different strategies and approaches from previously rated asset managers, Morningstar said. These funds, including their ratings, are: PIMCO Flexible Credit Income (Silver), PIMCO Flexible Municipal Income (Bronze), Capital Group KKR Core Plus+ (Neutral), Capital Group KKR Multi-Sector+ (Neutral), TCW Private Asset Income (Neutral) and First Trust Alternative Opportunities (Negative).
“Our initial ratings reflect differing levels of conviction in each strategy,” according to Lutton. “Higher-rated strategies demonstrated strong management teams and proven experience, while the lowest rating was influenced by structural concerns that warrant further evaluation,” she said.
The ratings methodology is based on the same framework Morningstar said it uses for other managed investments, such as ETFs and mutual funds, including assessments of a fund’s underlying investment process, management team and parent company.
The research approach and weightings account for liquidity constraints, potential private asset exposure and other characteristics unique to semiliquid structures, the company said.
Morningstar made the initial set of ratings and analysis available to all investors in a new research paper, “Morningstar’s Inaugural Medalist Ratings for Semiliquid Funds.”
Morningstar said it plans to expand its qualitative coverage of semiliquid funds.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
