Evaluating the people behind your investment fund has long been a key pillar of the Morningstar Medalist Rating; it remains crucial to the new Medalist Rating for Semiliquid Funds that invest in private markets.
These vehicles, like those with public securities, depend on human judgment and long-term decision-making. However, private investments demand coordination across specialized teams. Private asset managers operate on multiple levels: core portfolio management for investment decisions and liquidity oversight, top-down investment and valuation committees for governance, and bottom-up organizational resources supporting the investment lifecycle from sourcing to exit.
In early September 2025, our manager research team will launch its first set of ratings for semiliquid funds. Like mutual funds and exchange-traded funds, we evaluate them on key factors such as investment process, management, performance, and fees but adapt our established approach to the unique characteristics of semiliquid structures. In this article, we’ll explore the key role of management. We also examine performance, investment process, fees, and parent firm in related articles.
Liquidity Management Adds a Core Competency
Key decision-makers in semiliquid funds must excel in asset selection, portfolio construction, and, critically, liquidity management. This encompasses not only broad experience and tenure but also familiarity with the nuances of semiliquid vehicles and their underlying assets. In semiliquid funds—such as interval funds with evergreen or continuously offered structures—liquidity management expertise is not a peripheral concern but a core competency.
Running these portfolios requires managing inflows, outflows, and distributions between the fund and its investors, as well as deploying capital (that is, investing in companies, loans, and so on) and staging exits (the sales or IPOs of companies or the maturation of loans, for example). Decision-makers’ experience in past stress scenarios, such as the covid-19 pandemic and 2022’s interest rate hikes, is a key element in discerning skill in aligning portfolio holdings and liquidity sleeves with redemption profiles. Even then, the histories of short-lived funds that have only known net inflows may not be very informative; semiliquid managers show their mettle—or lack of it—during prolonged periods of heavy redemption requests.
Oversight Is Imperative
The People Pillar considers the oversight and accountability of investment and valuation committees. These bodies ensure disciplined asset selection and fair value estimation, which are harder to verify in private markets.
Effective investment committees aren’t merely rubber-stamping. They should have defined voting processes, diverse perspectives, and clear and consistent underwriting standards. As asset managers seek a wider audience for private assets among retail investors, they must put newly available capital to work wisely.
Valuation committees are also vital in balancing the need to strike net asset values for semiliquid funds with redemption pressures and regulatory and industry scrutiny. It’s essential to understand how frequently managers update valuations, use third-party appraisals or benchmark inputs, and oversee assets without the continuous pricing feedback that public markets provide. The presence of documented processes and accountability mechanisms signals strong governance, mitigating the subjectivity in private market investing.
It Takes a Village: From Sourcing to Exit
Organizational resources play distinct roles in generating returns from private markets. Beyond portfolio and liquidity management, deal sourcing, due diligence, value creation, and exit execution are crucial. Our evaluations will consider whether firms have sufficient functional depth to handle the full lifecycle of their investments as well as unforeseen events. Having a dedicated restructuring team, for instance, signals readiness to manage downside risk in private credit. Meanwhile, operations teams with experience handling rolling subscriptions and potentially full or oversubscribed redemption windows are essential.
Effective information flow across functional areas helps prevent fragmented operations, given the scale of many private market platforms. Firms that institutionalize communication are better able to manage complexity in a fragmented data environment that lacks the standardization, timeliness, and comparability of public market information. Teams must be able to capture raw, unstructured information from disparate sources—ranging from portfolio company financials to deal sponsor updates—and distill it into actionable insights that can inform investment, risk, and liquidity decisions.
Further complicating matters is the rise of collaborations between public and private asset managers, such as the interval funds recently launched by Capital Group and KKR. For these partnerships to succeed, firms must be in constant dialogue, maintain awareness of each other’s portfolio activity, and commit to a shared approach that ensures true alignment rather than parallel efforts.
Incentives: Aligning Interests
The People Pillar evaluates incentive compensation. In public markets, portfolio managers must disclose how much they invest in the US funds they run, and annual bonuses and deferred compensation tied to long-term results can align their interests with those of fundholders.
Private market funds’ incentive structures are different. They often charge incentive fees or carried interest, which is a share of profits (typically 20% for equities) that managers receive as a performance-based incentive once a fund’s investments generate returns above a certain hurdle rate. While that arguably aligns managers with their investors, private asset funds need to ensure there’s a fair distribution and investors aren’t giving up too much to the manager.
Co-investments, which entail a fund’s general partner owning capital with other fund investors, further align incentives. When senior leadership ties its wealth to a fund’s long-term results rather than short-term fundraising goals, alignment is evident.
Evaluating the People Pillar for private market and semiliquid vehicles requires thorough analysis. Beyond assessing portfolio managers and liquidity management, it entails weighing whether decision-making structures, governance frameworks, organizational capabilities, and incentives are all calibrated to the unique demands of the strategy and product wrapper. A semiliquid fund earns a High People Pillar rating not just by having star talent, but following a system that consistently enables good judgment, accountability, transparency, and alignment. Given semiliquid funds’ limited liquidity and transparency, the caliber and configuration of the people behind the vehicle are key indicators of success or risk.