Due Diligence: How to Evaluate a Semi-Liquid Alternative Fund

Due diligence starts by separating the claim from the mechanic that would make the claim true.

This article uses controlled examples only. It does not rely on real fund names, real offering documents, or product-specific events.

Key takeaways

• Review wrapper, liquidity, fees, valuation, portfolio risk, and operations as separate gates.
• Do not let manager brand, distribution access, or yield substitute for document review.
• Ask which document family usually proves each claim.
• Product surfaces remain the source-backed place for actual fund facts.

Gate 1: wrapper

Start with the legal structure. The wrapper controls liquidity rights, reporting, tax form, leverage limits, and investor protections.

Ask:

• Is the vehicle registered or private?
• Is the exit mechanism a repurchase program, interval repurchase offer, or tender offer?
• Is there a legal minimum repurchase floor or only manager discretion?
• Which document states the rule?

Gate 2: liquidity

Controlled example: MODEL-LIQUIDITY offers quarterly repurchases up to 5% of NAV. In a stress window, investors request 12% of NAV and receive a partial fill.

The review question is not whether the cap exists. The review question is what happens when requests exceed capacity.

Ask:

• What is the cap and cadence?
• Are unfilled requests cancelled, queued, or resubmitted?
• Can the board reduce, suspend, or modify the program?
• How is the fill rate calculated?

Gate 3: fees

Fees should be reviewed by layer:

• Management fee.
• Incentive or performance fee.
• Distribution or servicing fee.
• Upfront load.
• Leverage expense.
• Platform or account-level costs.

Controlled example: MODEL-FEE-STACK has the same gross return across two share classes, but different investor outcomes because one class carries a servicing fee.

Gate 4: valuation

Private marks are estimates. They may be reviewed by third parties and approved by a board, but they still depend on methodology, timing, and judgment.

Ask:

• When was the NAV struck?
• What portion relies on Level III or model-based inputs?
• Which valuation policy applies?
• Has a later market event made the mark stale?

Gate 5: operations and implementation

The operational review should cover eligibility, account type, tax form, subscription timing, transfer-agent workflow, and platform availability.

Advisor language

I would not compare returns until I can identify the wrapper, exit mechanics, fee basis, valuation process, and the document family supporting each claim.

Educational example only. Not based on any specific fund.