Interval funds

Key takeaways

• Interval funds are closed-end vehicles with periodic redemption windows.
• These funds may offer more liquidity than traditional PE funds, but less than public equity funds.
• While open to institutional investors, interval funds are also an access point for eligible individuals to invest in private equity, private credit and real estate.
• Governed by the Investment Company Act of 1940 in the US, these vehicles’ periodic redemptions are mandated by law.

What is an interval fund?

An interval fund is a type of Securities and Exchange Commission-registered closed-end fund that offers investors access to illiquid assets including private equity, private credit and real estate, while providing limited opportunities to redeem shares at regular intervals.

Structured under the Investment Company Act of 1940, interval funds are registered investment vehicles subject to regulatory oversight, including periodic reporting and disclosure requirements. Unlike closed-ended public equity and bond funds that trade on public exchanges, interval funds do not list their shares on secondary markets. Instead, they allow investors to redeem a portion of their holdings, typically 5–25% of the fund’s net asset value (NAV), at set intervals, often quarterly.

The core purpose of an interval fund is to bridge the gap between fully liquid mutual funds and long-term, illiquid private funds. By doing so, interval funds may give investors a way to gain exposure to asset classes that have historically been difficult to access outside of institutional portfolios.*

How do interval funds work?

Interval funds operate on a closed-end structure with limited redemption windows. After purchasing shares, investors may only redeem them during scheduled repurchase periods, which are disclosed in advance and generally occur quarterly. The fund is required to repurchase a certain percentage of shares outstanding at each interval, although these redemptions are not guaranteed in full if requests exceed the limit.

Shares are continuously offered, meaning investors can subscribe to the fund at any time, unlike traditional private equity funds that close fundraising after a set period. The fund’s NAV is calculated periodically, typically daily or monthly and redemptions are processed based on the most recent NAV.

Fees can include management fees, performance-based fees and operating expenses, and may be higher than those charged by mutual funds due to the complexity of the underlying investments. Some interval funds may also impose initial lock-up periods, during which redemptions are restricted, to stabilise capital early in the fund’s lifecycle.

Use in private equity and private credit

Interval funds have emerged as a flexible vehicle for allocating to private market strategies, including private equity, venture capital, direct lending and opportunistic real estate. They allow investors to participate in traditionally illiquid markets without committing to a decade-long lock-up.

While they don’t offer the full liquidity of daily traded funds, interval funds often provide lower minimum investment thresholds and shorter commitment horizons than traditional private funds, making them attractive to a wider pool of investors.

For example, a venture capital interval fund might hold late-stage startup equity and pre-IPO shares, while a credit-focused interval fund could invest in syndicated loans, asset-backed securities or direct lending strategies. The structure allows managers to hold these longer-dated investments while potentially offering periodic liquidity.

Who invests in them?

Interval funds are popular among accredited investors, high-net-worth individuals and institutional allocators looking to diversify portfolios with alternative assets. Some interval funds are also open to qualified retail investors, depending on the fund's registration and distribution strategy.

These vehicles are especially appealing to investors who are comfortable with some illiquidity but not ready to commit capital for 10 years or more. They serve as a useful middle ground between traditional public equity funds and private market funds.

While interval funds and evergreen funds are sometimes grouped together as “semi-liquid” options for accessing private markets, they are structured quite differently. Interval funds are SEC-registered vehicles with redemption opportunities set by law, typically allowing investors to withdraw a portion of their holdings on a quarterly basis. Evergreen funds, on the other hand, are private vehicles that continuously raise and recycle capital, with subscriptions and redemptions permitted at the manager’s discretion rather than by regulation. In practice, this means interval funds may provide greater transparency and legally mandated liquidity windows, while evergreen funds may offer more flexibility but less predictability.*

Pros and cons

Pros

• Access to private markets without multi-year lock-ups
• Diversification across less liquid asset classes
• Predictable, periodic redemption windows

Cons

• Redemption limits prevent full liquidity when needed
• NAVs are based on periodic valuations of private assets, which are updated less frequently than public securities funds
• Fee structures can be more complex and layered

Interval funds are more likely suited for long-term investors who understand and can tolerate a degree of illiquidity and who are looking to enhance portfolio diversification with alternatives.

Interval funds vs. other fund types

Interval funds sit between mutual funds and private equity funds on the liquidity spectrum. They allow access to illiquid or semi-liquid strategies while offering structured, periodic exits. Mutual funds typically offer daily liquidity, making them highly accessible but with limited exposure to illiquid investments. Private equity funds, by contrast, require multi-year commitments, with little or no liquidity for an extended period of time.

Conclusion

Interval funds are gaining traction as a practical vehicle for accessing alternative investments in a semi-liquid format.* By offering periodic redemption windows and a more approachable investment structure, they may provide a compelling option for investors who want exposure to private equity, credit or real assets without the full illiquidity of traditional private funds.

That said, while these strategies are designed to offer more liquidity than conventional private equity vehicles, they are still categorised as illiquid investments. Redemption opportunities remain limited, making it important for investors to carefully assess the specific structure and liquidity constraints before committing capital. For the right investor, interval funds may nonetheless serve as a valuable component of a diversified long-term portfolio.