Franklin Templeton CEO Jenny Johnson speaks during the Milken Institute Global Conference.

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For most of 2026, legions of wealthy individuals have been trying to cash out of semiliquid funds, providing the first major stress test for products that make up a giant portion of the $1.8 trillion private credit market. These outflows have also put fund managers, from Blue Owl Capital to Blackstone, on the defensive.

Some have come out in praise of the essential design of these vehicles, which are seen as a crucial source of fee-earning revenue for the alternatives industry.

Other industry leaders have waded into a debate—fueled by an ongoing stream of press coverage—about whether wealthy investors and their intermediaries are adequately informed about the limited liquidity rules governing hot-selling evergreen funds, which are also widely known as semiliquid products.

Some went as far as suggesting the industry do away with the "semiliquid" label, considering it an ill-conceived and misleading name for products that lack the full liquidity profile that retail investors recognize in mutual funds and ETFs.

"We need to make sure the story is clear: Private markets are illiquid. That's just it. You invest in private credit—it is illiquid," said Jenny Johnson, CEO of Franklin Templeton, at an investment conference earlier this year. The CEO of EQT, Per Franzén, predicted at the same event that "the word 'semiliquid' will disappear."

Debating what language the industry should or shouldn't use highlights the staying power of a narrative—still largely unsubstantiated—that investors and wealth managers were somehow caught off guard by the limited ability to get their money back all at once. And in arguing over the supposed faults of the semiliquid label, fund managers and distributors may be missing the mark.

To be sure, the need for more education of financial advisers and clients about the complexities of private market investing is a widely recognized priority. Surveys by Morningstar and others consistently show that registered investment advisers, who are the typical intermediaries for distributing private funds, have little familiarity with semiliquid fund structures.

Much of the tension over the term "semiliquid" stems from conflating the partly liquid form of the product container with the illiquid assets inside it. Some argue the term overstates the exit options that actually exist by emphasizing fund managers' willingness to take requests for share redemptions, which don't exist in drawdown funds built for institutional investors.

In reality, every investor in a private fund, and their financial adviser, receives ample information and disclaimers about the product's lack of liquidity. And if investors decide to cash out during periodic redemption windows, they should be well aware that they may only receive a prorated portion of their money. Semiliquid funds typically cap redemptions at 5% of the fund value, and many fund managers' buybacks are subject to board discretion.

Throughout this year, a liquidity backlog has piled up across the private credit market. The fact that investors didn't get their money back right away doesn't necessarily mean they didn't understand the product.

"That's front and center what you're signing up for," said Bryan Armour, director of Morningstar's ETF and semiliquid research. "The gating on redemptions is to be expected, and it is working as intended, to protect existing investors from being subjected to forced selling to raise cash for buybacks."

Morningstar, the parent of PitchBook, has committed its research organization to the "semiliquid" label as general practice regarding fund structures that are less than fully liquid. The company has detailed the landscape of these products in its annual State of Semiliquid Funds report.

If there is a labeling problem, it is clearer in the other shorthand that shows up in marketing material—websites, fact sheets and brochures that call out key, comforting terms and conditions such as "periodic liquidity" or "regular redemption opportunities." For some retail investors, that may be showing them what they want to see.

An online fact sheet for Cliffwater's CCLFX credit interval fund highlights its "investor-friendly structure" and cites "expected quarterly distributions and repurchases," with a few caveats spelled out in the fine print.

Doing away with the semiliquid label won't erase the perception problems stemming from caps on redemptions. Some things remain the same no matter what label is used. Advisers and their clients will always need to familiarize themselves with terms and conditions attached to any investment.

The great liquidity crunch of 2026 put a spotlight on how much retail clients differ from big institutional investors. The sooner fund managers reckon with those differences, the sooner they can draw from lessons they've learned.

This article originally appeared on PitchBook News