Morningstar debuts fund rating framework for semiliquid investments

Morningstar has launched a new forward-looking ratings methodology tailored to the growing market of semiliquid investment vehicles, extending its Medalist Rating system to provide greater clarity around public-private market hybrids.

The Morningstar Medalist Rating for Semiliquid Funds will evaluate a range of limited-liquidity vehicles, including interval funds, tender-offer funds, nontraded REITs, and nontraded business development companies in the US.

Internationally, the ratings will also apply to European Long-Term Investment Funds, United Kingdom Long-Term Asset Funds, and certain Australia-based managed investment schemes.

“Semiliquid funds are becoming more accessible and gaining traction in the investment landscape, but their unique structures present challenges that warrant a reliable framework for evaluation,” said Laura Lutton, Morningstar’s global head of manager research.

Lutton highlighted the firm's "long track record of helping bring clarity to complex areas of the market” based on a "rigorous approach," which she said the firm will also bring to its new rating framework.

According to Morningstar data, investor interest in semiliquid structures has grown rapidly. US interval funds alone have expanded at an annualized rate of nearly 40 percent over the past decade through May 2024. By at least one count, there are more than 250 interval or tender-offer funds today, with tens of billions of dollars managed between them.

The new rating methodology will build on Morningstar’s existing system for mutual funds and exchange-traded funds. However, it incorporates specific considerations related to liquidity constraints and private asset exposure. Using the familiar five-tier scale – Gold, Silver, Bronze, Neutral, and Negative – the rating aims to reflect a strategy’s potential for long-term outperformance and to support investor due diligence across different market environments.

Each rating will offer insights on factors including risk, cost, manager tenure, and portfolio fit. The evaluation will also address whether a given vehicle is suited to an investor’s goals and liquidity profile. For now, the approach will remain fully qualitative, with analyst coverage determined by investment merit, demand, and client interest.

Morningstar will begin releasing its medalist ratings for semiliquid funds in the third quarter of 2025, focusing first on US-based semiliquid strategies. The ratings will be made available through Morningstar.com and integrated across the firm’s platforms including Morningstar Direct and the Direct Advisory Suite, which was launched in February with Black Diamond as the first integration partner.

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The new framework arrives amid broader efforts by Morningstar to strengthen its presence in private markets and develop a more unified investment assessment system. Recent moves include the introduction of private capital fund data into Morningstar Direct, the launch of the PitchBook Unicorn 30 Index, and updates to Morningstar’s Categories system to better distinguish between public and private strategies.

Earlier this year, Morningstar also acquired Lumonic, a private credit portfolio monitoring firm. The integration of Lumonic’s tools with PitchBook’s analytics and Morningstar Credit’s expanded coverage of private debt further signals the firm’s intention to deepen its foothold across alternative asset classes.