Semi-liquids: Can your valuation framework stand the heat?

Clair Turketo Managing Director, Client Solutions – Carne Group

Patricia Volhard Partner – Debevoise & Plimpton

Niels Ozerée Partner in Advisory – KPMG Luxembourg

Semi-liquids are becoming mainstream. And with it comes a tension that’s increasingly hard to ignore: how do you provide periodic liquidity against assets whose value is often highly subjective, lagged and hard to track in real-time?

In a recent webinar hosted by Carne Group, Debevoise & Plimpton and KPMG, industry experts explored the critical valuations challenge and the practical considerations for managers as semi-liquid funds scale.

The discussion brought together Clair Turketo, Managing Director of Client Solutions at Carne, Patricia Volhard, European Chair of the Investment Management Group at Debevoise & Plimpton, and Niels Ozerée, Partner in Advisory at KPMG Luxembourg. Together, they discussed the governance and operational implications of semi-liquid structures across European private markets.

The resulting conversation reflects a broader shift underway across the industry. Semi-liquid products are no longer being treated as experimental distribution structures. They are becoming institutionalised operating models – and that means the question of valuation is switching from a technical issue to a matter of strategic governance.

Valuation challenges aren’t new

Across private markets, the inherent challenges of valuing illiquid assets are well understood. But what is changing is the degree to which valuation outcomes now directly influence investor treatment.

In traditional closed-ended structures, valuation uncertainty was largely absorbed by long investment horizons. Semi-liquids alter that balance. Once periodic subscriptions and redemptions are introduced, valuation frequency, methodology and timing begin to affect allocation fairness much more directly. That creates heightened sensitivities around stale pricing, lagged market signals and subjective assumptions.

As the panel discussed, the question is now whether valuation frameworks designed for long-duration capital structures remain fully aligned with products offering recurring liquidity events. That distinction is becoming increasingly important as semi-liquids scale into wealth and semi-professional investor channels.

NAV integrity is becoming central to investor confidence

In semi-liquid structures, Net Asset Value (NAV) is moving beyond a reporting metric. Now, it increasingly determines entry and exit pricing, fee calculations and, ultimately, perceptions of investor fairness.

The panel highlighted that many firms are now placing greater emphasis on independent oversight, model validation and valuation challenge processes – because the consequences of valuation divergence become more tangible once liquidity features are introduced.

Importantly, the discussion suggested that regulators are viewing this through the same lens. As private markets become accessible to a broader pool of investors, supervisory focus is shifting towards whether governance frameworks can adequately support more frequent dealing – particularly during periods of volatility when public and private market pricing may temporarily diverge.

As Patricia Volhard added in the webinar: ‘You will have situations where your NAV does not yet reflect a movement that impacts your portfolio. And so redeeming investors might be going out at a better price than new investors coming in.’

Liquidity management and valuation are becoming inseparable

Liquidity management tools – including gates, redemption limits and anti-dilution mechanisms – are increasingly being viewed as extensions of valuation governance itself.

The panel argued that this represents a significant shift in mindset for the industry at large. Historically, liquidity management and valuation often sat in adjacent but separate operational areas. Semi-liquids are forcing firms to integrate them much more tightly.

Managers must now continuously assess whether redemption terms, valuation frequency, liquidity buffers and portfolio composition remain aligned – particularly during stressed market conditions. And that’s one reason why regulators under AIFMD II are placing increasing emphasis on liquidity stress testing and formal liquidity management frameworks.

Complexity itself is becoming a source of risk

As managers compete to differentiate semi-liquid offerings, structures are becoming increasingly layered – with multiple share classes, hedging arrangements, liquidity sleeves and bespoke redemption mechanics.

The panel cautioned that operational sophistication does not always translate into operational resilience. In practice, every additional feature places more pressure on valuation cycles, dealing processes, treasury management and oversight frameworks. That pressure becomes most visible during periods of market volatility or elevated redemption activity.

As a result, some firms are increasingly prioritising scalability and governance simplicity alongside product innovation.

Niels Ozerée reflected on the mounting complexities in the webinar: ‘We’ve seen across a number of manager discussions that there’s a tendency to want to stack too many features into a single product […] Before you know it, you have quite a different number of features within your own product, which is hard to maintain.’

The semi-liquid market is under growing scrutiny

The broader message from the panel was that semi-liquid private market structures are entering a more mature stage of development. Investor demand remains strong, particularly as wealth channels continue to seek greater access to private assets. But the conversation is evolving beyond growth.

The next phase of market development is likely to focus increasingly on governance credibility – specifically whether managers can demonstrate that valuation frameworks, liquidity tools and operating models remain robust under stress.

Catch up on the panel’s expert insights in full – watch the webinar replay.

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