No Drawdowns, Instant Fund Deployment

For years, traditional private credit funds have operated through drawdowns: capital is called in phases and drawn down in tranches over time.

While effective, this often creates an overlooked challenge:

• Opportunity loss
• Reinvestment risk

Capital waiting to be deployed, or cash distributed before investors need it, can create a return drag that quietly impacts outcomes. As per estimates, the overall drag can be 0.5-1% p.a., on a pre-tax basis, in investor’s actual returns.

Exhibit 1 – Traditional private funds typically draw down over a period of 1-2 years and gradually run down the portfolio towards the end

How can semi liquid funds democratize private credit?

With an open-ended structure, semi-liquid funds immediately deploy committed capital and keep it continuously invested. This helps reduce cash drag and reinvestment risk.

Investors also benefit from more flexible experience. They can use a single drawdown and periodic redemption options matching their liquidity needs.

This could potentially democratize private credit, bringing them closer to traditional asset classes in the way they are accessed and transacted.

Exhibit 2 – Semi-liquid funds immediately draw down funds, keeping investments invested in the portfolio

Gross returns in semi-liquid strategies may appear 1–1.5% lower than traditional private credit funds. But the reduction in cash drag can make actual net outcomes meaningfully more comparable.

As private credit evolves, the next differentiator may not just be what a fund invests in, but how it is built!