Speed Limits for Liquidity
Queues, Gates, and Runs in Semi-Liquid Funds
By Sergei Sukhov · Market Microstructure Research Lab
Abstract
Semi-liquid funds — non-traded BDCs, interval and tender-offer funds — repurchase shares each quarter at net asset value up to a cap, typically 5% of shares, and ration excess requests pro rata. We develop an equilibrium model of this mechanism. A cap works as a speed limit. If the drain it permits, κ[θ + Λ(1 + θ)], does not exceed the fund's excess return plus costless liquidity, π + Λμ, no investor base can run the fund. Above this floor, runs are sustained by the backlog of liquidity-constrained investors they trap in the queue. We characterise the run region in closed form, show that a backlog above a tipping level eliminates the no-run equilibrium, and show that tighter caps can be more fragile. We then characterise all run-proof designs. Among work-conserving anonymous rules, a fund is robust to every investor base if and only if its cap satisfies the speed limit — most cheaply implemented through a fee we show to be minimal — or all liquidity needs are verified and prioritised and requests are withdrawable. Irrevocable, first-in-first-out and last-in-first-out queues are more fragile than withdrawable pro rata, and leverage lowers the floor. Tender-offer filings for 46 funds show that proration, absent in private-credit BDCs before 2026, reached 23% of their offers in 2026 and is highly persistent. AI disclosure: This paper was prepared with substantial assistance from a large language model (Claude, Anthropic). The author's and the AI system's roles are described in the Declarations section. The author takes full responsibility for the content.
Keywords
- Semi-liquid funds
- Redemption gates
- Fund runs
- Private credit BDCs
- Interval funds
- Tender-offer funds
- Market design
Cite this paper
Sukhov, S. (2026). Speed Limits for Liquidity: Queues, Gates, and Runs in Semi-Liquid Funds. MMRL Working Paper WP-2026-006. SSRN. https://doi.org/10.2139/ssrn.7518480
@techreport{sukhov2026speed,
author = {Sukhov, Sergei},
title = {Speed Limits for Liquidity: Queues, Gates, and Runs in Semi-Liquid Funds},
institution = {Market Microstructure Research Lab},
type = {MMRL Working Paper},
number = {WP-2026-006},
year = {2026},
month = sep,
doi = {10.2139/ssrn.7518480},
url = {https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7518480},
}