How periodic liquidity works
Much of this chapter concerns evergreen and semi-liquid vehicles, and their structural mechanics are treated at greater length in BIP Capital's dedicated guide to evergreen structures.
Semi-liquid structures provide liquidity through scheduled mechanisms rather than continuous markets. Interval funds make mandatory repurchase offers under SEC Rule 23c-3, commonly 5% of outstanding shares per quarter.12 Tender offer funds and non-traded BDCs make repurchase offers at net asset value at the board's discretion; the practice is regular, but the obligation is not absolute. Public repurchase-offer filings illustrate the standard design: a fund offering to repurchase up to 5% of outstanding shares at NAV in a given period.16
Two implications follow. First, liquidity is periodic: an investor who misses a window waits for the next one. Second, liquidity is proportional: if requests exceed the offer amount, investors are typically repurchased pro rata, and the remainder carries forward.
Gating and why it exists
Repurchase limits, often called gates, exist to protect the investors who stay. Without them, a wave of redemptions in a stressed market would force the manager to sell illiquid assets quickly and cheaply, transferring value from remaining investors to those who depart. Gates convert that forced-sale risk into a queue.
Advisors owe clients candor on this point: gates are most likely to bind at exactly the moments clients most want liquidity. That is not a hidden defect; it is the design working as intended. The right response is not to avoid semi-liquid structures but to size them so that no client ever depends on a repurchase window being open.
NAV-based pricing
Semi-liquid funds transact at NAV, which makes valuation quality a first-order concern: entry and exit prices are only as fair as the marks behind them. Advisors should understand both faces of NAV's smoothness: it reflects genuine long-horizon ownership, and it also means reported values respond to markets with a lag. Chapter 11 addresses the valuation-smoothing debate directly.
Liquidity budgeting at the portfolio level
Fund mechanics are only half of the discipline. The other half is the client-level liquidity budget, which you can build in four steps.
1. Map cash needs. Establish the client's known and probable cash requirements over one, three, and five or more years.
2. Tier the portfolio. Classify holdings by realistic time-to-cash: daily-liquid assets, periodically liquid assets such as interval funds and evergreen BDCs, and committed illiquid assets such as drawdown funds.
3. Size the illiquid sleeve to the surplus. Only capital that is not needed across the relevant horizon, with a margin of safety, belongs in periodically liquid or illiquid tiers.
4. Stress the plan. Assume repurchase offers are prorated or suspended for a year. If the client's plan still works, the sizing is honest. If it does not, the allocation is too large regardless of how attractive the strategy is.
Matching client to structure
Structure selection follows the budget.
Many portfolios reasonably use both. The error to avoid is the mismatch: a drawdown commitment against near-term cash needs, or an evergreen position sized as if its liquidity were guaranteed.