Agefi Luxembourg - octobre 2026

A s private markets expand beyond institutional inves­ tors, semiliquid funds are emerging as a way to combine long­ term exposure to illiquid assets with controlled liquidity. The growth of private equity, private credit, infrastructure and real estate investing has increased demand for fund structures that offer periodic liquidity while maintaining exposure to illiquid as­ sets. As a result, semiliquid vehicles such as ELTIFs, evergreen funds and certain openended AIFs are gaining traction across Europe. Their appeal lies in balancing two competing objec­ tives: providing investors with access to liquidity while preserving a longterm invest­ ment strategy. However, offering redemption opportunities does not make the underlying assetsmore liquid. In this context, the revised ELTIF framework offers valu­ able insights into how regulators are seeking to address these challenges andmay serve as a blue­ print for the broader development of semiliquid private market funds. The liquidity and valuation challenge of semiliquid funds The defining challenge of any semiliquid fund is reconciling periodic investor liquidity with port­ folios invested in inherently illiquid assets. Unlike listed securities, private equity, private debt, infra­ structure and real estate assets often have limited secondary markets, lengthy disposal processes and valuations based on estimates rather than ob­ servablemarket prices. This inherent mismatch re­ quires robust liquidity management frameworks and prudent redemption policies to protect in­ vestors and maintain portfolio stability. Valuation sits at the heart of the semiliquid fund model. Because subscriptions and redemptions are generally executed at NAV, inaccurate valua­ tions can result in value transfers between re­ deeming and remaining investors. The challenge is particularly acute in privatemarkets, where val­ uations often rely on discounted cash flow mod­ els, comparable transactions, earnings multiples or independent appraisals, all of which involve significant judgement. During periods of market stress, declining transaction activity can make these judgements evenmore challenging, increas­ ing the risk of valuation uncertainty. Consequently, robust valuation governance is a key investor protectionmechanism. Managers are increasingly expected to demonstrate transparent methodologies, independent oversight and regu­ lar validation of valuation assumptions to ensure that NAV calculations fairly reflect the value of the underlying assets.As regulators continue to focus on the growth of semiliquid privatemarket prod­ ucts, the ability to manage both liquidity and val­ uation risks consistently remains central to the sustainability of these structures. ELTIF 2.0: a regulatoryblueprint for semiliquidity The revised ELTIF framework provides one of the clearest regulatory blueprints for managing liq­ uidity in private market funds. Introduced through Regulation (EU) 2023/606, the reform aimed to enhance the attractiveness of ELTIFs, broaden retail investor access and support the de­ velopment of semiliquid private market strate­ gies. While preserving their longterm investment focus, the revised rules acknowledge growing de­ mand for openended structures. This approach is supplemented by Commission Delegated Regulation (EU) 2024/2759, which sets out detailed requirements on redemption policies, liquidity management tools and matching mech­ anisms. Together, these rules offer valuable lessons for the design of semiliquid funds more broadly. A) Liquidity buffers A key feature of the revised ELTIF framework is the recognition that redemption liquidity should be supported by prepositioned liquid resources rather than relying exclusively on the disposal of longterm assets. Under the rules introduced by Regulation (EU) 2023/606 and further specified in Commission Delegated Regulation (EU) 2024/2759, ELTIFs offering redemption rights be­ fore the end of their life must establish andmain­ tain a liquidity management policy that is appropriate to their redemption arrangements and investment strategy. This framework requires managers to assess the proportion of liquid assets needed to meet foreseeable redemption requests, taking into account factors such as redemption frequency and notice periods. The objective is not to transform the underlying portfolio into a liquid strategy, but rather to create a liquidity buffer capable of absorbing expected cash outflows while preserving the longterm in­ vestment profile of the fund. Managers are also ex­ pected to conduct regular liquidity assessments and stress testing to determine whether available liquid resources remain sufficient under adverse scenarios, reinforcing a forwardlooking approach to liquidity planning. B) Redemption gates and notice periods The revised ELTIF regime expressly links re­ demption rights to the liquidity characteristics of the portfolio instead of granting investors unre­ stricted liquidity. Notice periods play a critical role in this regard. They provide managers with advance visibility of anticipated cash outflows and allow sufficient time to manage liquidity in an orderly manner. Similarly, redemption frequencies must be de­ signed to reflect the fund’s ability to generate liq­ uiditywithout disrupting the investment strategy. The Delegated Regulation also permits the use of quantitative redemption limits (redemption gates). Thesemechanisms enablemanagers to cap the volume of redemptions processed during a given dealing period where requests exceed pre­ defined thresholds. Gates are intended to prevent disproportionate liquidity demands from forcing asset disposals at distressed prices or creating un­ fair outcomes for remaining investors. In practice, they act as a tool to spread redemption activity over time and maintain equitable treatment among investors. C) Matching mechanisms One of the most innovative elements of the ELTIF 2.0 framework is the introduction of a formal matching mechanism. This mechanism acknowl­ edges that liquidity does not necessarily need to be generated through portfolio realizations and that investor transfers can, in some circumstances, offer a more efficient solution. Under the Delegated Regulation, managers may establish procedures allowing investors seeking redemption to be matched with incoming in­ vestors willing to acquire the relevant units or shares.Where successful, the transaction can occur without requiring the fund to liquidate its under­ lying investments or utilize available liquidity re­ serves. This approach can significantly mitigate liquidity pressures, particularly for portfolios in­ vested in highly illiquid assets such as infrastruc­ ture, real estate or private equity. It also supports the longterm investment objec­ tive of the fund by reducing the need to alter port­ folio allocations in response to shortterm redemption activity. However, the mechanism must operate within a clearly defined framework that ensures fairness, transparency and equal treatment among investors. D) Enhanced investor disclosure The revised ELTIF regime recognizes that effective liquidity management is not solely a matter of portfolio construction and operational processes. It also depends on ensuring that investors fully understand the nature and limitations of the liq­ uidity being offered. To this end, the framework introduces enhanced disclosure obligations re­ quiringmanagers to provide clear and detailed in­ formation on redemption arrangements, notice periods, liquidity management tools, redemption limits, matching mechanisms and circumstances under which redemptionsmay be restricted or de­ ferred. Particular emphasis is placed on ensuring that investors do not perceive ELTIFs as offering liquidity comparable to traditional UCITS funds. Disclosures should clearly explain that liquidity remains secondary to the fund’s longterm invest­ ment strategy and is subject to operational and regulatory safeguards designed to protect all in­ vestors. Transparency therefore becomes a critical component of investor protection, helping to re­ duce the risk of misunderstanding, inappropriate product selection and potential liquidity­ driven market stress. Tokenization and secondary market liquidity Tokenization is increasingly being explored as a complementary tool to support liquidity in semiliquid private market funds. By representing shares on distributed ledger technol­ ogy (DLT), tokenization can facilitate more efficient trans­ fers between investors and potentially enhance secondary market activity. Tokenizationmay complement matching mecha­ nisms by helping connect buyers and sellers more efficiently, providing an additional avenue for investor exits without requiring asset disposals by the fund. While it does not alter the liquidity profile of the underlying private assets, it can simplify transac­ tion processes, improve transparency and reduce operational frictions associated with transferring ownership interests. Although regulatory, opera­ tional and market infrastructure challenges re­ main, the continued development of tokenized fund ecosystems could contribute to broader liq­ uidity solutions for privatemarket products while maintaining alignment with their longterm in­ vestment objectives. The role of Part II UCIs The principles underpinning ELTIF 2.0 are also rel­ evant beyondELTIFs themselves. In Luxembourg, one of the structures increasingly considered for semiliquid private market strategies is the Part II UCI. Unlike ELTIFs, Part II UCIs do not benefit from a specific productlevel liquidity framework tailored to semiliquid investing. Nevertheless, managers remain subject to broader liquidity risk management requirements where applicable. Different from many other retailori­ ented products, Part II UCIs can be marketed to retail investors without a minimum investment threshold, making them an attractive gateway to private markets. There is no predefined list of eli­ gible assets, allowing managers to invest across a wide range of alternative asset classes, including private equity, private credit, infrastructure and real estate, subject to diversification and risk­ spreading requirements. art II UCIs can also be established inmultiple legal forms, including contractual structures (FCPs), traditional corporate vehicles such as SAs, as well as limited partnership structures (SCSp). This en­ ables managers to combine different investment strategies, liquidity profiles and distribution ap­ proaches within a single vehicle, making Part II UCIs a particularly adaptable platform for the de­ velopment of semiliquid privatemarket products aimed at a broader investor base. Looking ahead As private assets continue expanding into broader investor segments, semiliquid structures are likely to play an increasingly important role in the European funds industry. Their success, however, will depend on more than simply providing re­ demption opportunities. Robust valuation practices, proactive liquidity management, transparent investor communica­ tion and comprehensive governance remain es­ sential to preserving investor confidence and maintaining fund stability. In this respect, the revised ELTIF regime offers valuable guidance extending well beyond ELTIFs themselves. By combining longterm investment objectives with carefully calibrated liquidity safe­ guards, the framework provides a practical blue­ print for the next generation of semiliquid private market funds. Muhammad Salman FAROOQUI, EY Luxembourg Assurance Partner Dimitri PALATE, EY Luxembourg Partner, Wealth and Asset Management How semi-liquid funds balance investor liquidity with illiquid assets Octobre 2026 19 AGEFI Luxembourg Marchés &Wealth