Glossary › Cash drag
Cash drag is the loss of return from money a fund holds as a reserve instead of investing it in private markets.
A semi-liquid fund must be able to meet redemptions without selling holdings under time pressure. For this it holds part of its assets in cash, money market instruments, bonds or listed securities. This buffer usually earns less than the actual portfolio, and the difference costs return – that is the cash drag.
A larger buffer makes the fund more robust when many investors want to leave at once, but depresses returns in calm times. A small buffer improves returns but raises the risk that the gate is triggered. Prospectuses often state a minimum or target ratio; how much is actually held is shown in the reports. When comparing performance with closed-ended funds, cash drag is one of the reasons why evergreen funds may show less.
99 of the 139 active funds state a liquidity ratio they hold or aim for as a buffer. The median is 15% of fund assets, the range runs from 0.1% to 55%. The higher the buffer, the larger the potential cash drag.
Lowest, middle and highest liquidity buffer · as at 16 Oct 2026
the evergreen performance chapter · all terms in the glossary