The recent revamp of ELTIFs (European Long-Term Investment Funds) facilitates the potential for fundraising through semi-liquid fund vehicles. Achieving this goal requires asset managers to manage and distribute funds that straddle the liquid-illiquid divide. The European industry is currently in a startup phase in a market with considerable long-­term potential. “Private equity players need to get up to speed on how to create and run facilities, such as liquidity buffers, that can enable the flexibility expected by non-institutional investors,” Mr Dragoni said. As for liquid-fund specialists, they often choose a fund-of-funds approach to give investors the range of exposure clients are seeking.

“It’s important to manage these arrangements efficiently in line with a clear strategy, including imperatives such as avoiding holding excessively large liquidity buffers that could impact the rate of return on private asset investments,” he said. “However, this must be balanced with ensuring retail investors can redeem at the time and valuation they expect,” he added.

Additionally, each asset manager will have their own strategy regarding liquidity management tools that are required during times of market stress. Fine-tuning mechanisms such as gating, swing pricing anti-dilution levies, and redemption fees requires diverse, high-level fund design expertise, and also the knowhow to put these plans into action. This execution relates to both the technical side of managing the fund, but also working with distributors. “Private asset specialists have less experience partnering with banks, independent financial advisors, and the like. While UCITS players have extra work to do to provide investors’ advisors with the timely information they need about the assets in these bespoke products,” Mr Dragoni explained. Moreover, throughout this process, it is vital to keep regulators up-to-date with necessary data and reports. Additionally, it is important to remain mindful of investors’ and distributors’ reporting needs. Asset and structuring expertise spanning both the liquid and illiquid worlds is vital to support these semi-­liquid funds. It requires an integrated, cross-discipline approach that brings together the specialist knowledge and expertise found within a major service provider’s organisation.“We have developed this expertise in house, and we have adapted our systems to facilitate seamless teamwork between our liquid and non-liquid assets specialists,” Mr Dragoni said. “Teams have the knowledge and technology infrastructure to scale and automate processes and meet operational challenges. Each fund is unique, and so each requires tailormade arrangements to achieve their goals,” he added.