Semi-liquid funds and investment trusts are a few examples of vehicles allowing investors access to a range of alternative assets, but they differ in how they’re structured, how easily you can access your money, and their benefits. Here’s a simplified comparison:
Structure:
Semi-liquid Funds: Open-ended, meaning they allow investors to buy or sell units periodically (e.g., monthly or quarterly).
Investment Trusts: Closed-ended, with a fixed number of shares traded on a stock exchange.
Liquidity:
Semi-liquid Funds: Offer limited liquidity, allowing withdrawals at set intervals to match the long-term nature of the assets.
Investment Trusts: Shares can be bought or sold daily on the stock market, but prices depend on demand and supply, which may not reflect the actual value of the assets.
Pricing:
Semi-liquid Funds: Units are priced based on the fund’s actual asset value (NAV).
Investment Trusts: Share prices are market-driven and can trade at a premium or discount to the NAV.
Assets:
Semi-liquid Funds: Focus on long-term, less liquid assets like real estate, private equity, or infrastructure.
Investment Trusts: Can invest in similar assets, but depending on the strategy can be exposed to 10-100% of illiquid assets.
Benefits of Semi-liquid Funds
Fair Pricing: Unlike investment trusts, semi-liquid funds are priced based on the true value of their assets (NAV), avoiding premiums or discounts caused by market fluctuations.
Stability for Long-Term Investors: Limited liquidity protects the fund from sudden large withdrawals, allowing fund managers to focus on long-term strategies without needing to sell assets quickly.