An introduction to interval funds
An investment vehicle for alternative investments
- Mutual funds, ETFs, and closed-end funds are common investment vehicles that many investors already use. “Interval funds,” however, may be less familiar.
- Interval funds are a specific type of closed-end fund. They differ from traditional mutual funds, or open-ended funds, which can issue or redeem shares on demand. Interval funds offer a specific investment vehicle structure within the closed-end fund classification that offers a high degree of transparency, like a mutual fund or ETF, while allowing portfolios to invest in less-liquid alternative assets, like a private fund. Unlike the more common exchange-traded closed-end funds, there are not a fixed number of shares outstanding.
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An investment in an interval fund is not appropriate for all investors. Unlike typical closed-end funds an interval fund’s shares are not typically listed on a stock exchange. Although interval funds provide limited liquidity to investors by offering to repurchase a limited amount of shares on a periodic basis, investors should consider shares of the Fund to be an illiquid investment. Investments in interval funds are therefore subject to liquidity risk as an investor may not be able to sell the shares at an advantageous time or price. There is also no secondary market for the Fund’s shares and none is expected to develop. There is no guarantee that an investor will be able to tender all or any of their requested Fund shares in a periodic repurchase offer.