Defining Interval and Tender Offer Funds
These funds are a type of continuously offered closed-end fund that frequently price shares at net asset value (NAV) but are not listed on an exchange. They are regulated under the Investment Company Act of 1940 (the ‘40 Act) and are registered with the Securities and Exchange Commission (SEC). This structure combines flexible underlying investment options with the investor protections of SEC registration, such as transparency through frequent public filings, an independent board, and audited financial statements.
Liquidity
Interval funds are required to make periodic repurchase offers at NAV of no less than 5% and up to 25% of shares outstanding.
Tender offer funds periodically offer to repurchase shares on a discretionary basis.
Underlying Investments
Open-end mutual funds are generally limited to holding no more than 15% of assets in illiquid investments. Interval and tender offer funds are not subject to this limitation. That is why these fund structures are attractive for a range of private market strategies.
Eligible Investors
Unlike many other private market structures, these funds have no minimum financial suitability requirements, such as being an Accredited Investor or Qualified Purchaser. Individual funds may set their own requirements.
Comparing Interval and Tender Offer Funds
| INTERVAL FUNDS | TENDER OFFER FUNDS | |
|---|---|---|
| Structure | Closed-end Fund | Closed-end Fund |
| Exchange Listed | No | No |
| NAV Calculation | Weekly/Daily | Varies |
| Redemption Obligation (i.e., liquidity) | Mandatory | Optional |
| Redemption Frequency | Every 3, 6, or 12 Months | Board Discretion |
| Redemption Threshold | 5 – 25% of Shares Outstanding | Board Discretion |
| Liquidity Requirement | During Redemption Period Only | None |
| Eligible Investors | All – No Requirement | All – No Requirement |
| Minimum Investment (varies by fund) | $1,000 – $10,000 | $1,000 – $50,000 |
| Tax Reporting | 1099 | 1099 |
| INTERVAL FUNDS | |
|---|---|
| Structure | Closed-end Fund |
| Exchange Listed | No |
| NAV Calculation | Weekly/Daily |
| Redemption Obligation (i.e., liquidity) | Mandatory |
| Redemption Frequency | Every 3, 6, or 12 Months |
| Redemption Threshold | 5 – 25% of Shares Outstanding |
| Liquidity Requirement | During Redemption Period Only |
| Eligible Investors | All – No Requirement |
| Minimum Investment (varies by fund) | $1,000 – $10,000 |
| Tax Reporting | 1099 |
| TENDER OFFER FUNDS | |
|---|---|
| Structure | Closed-end Fund |
| Exchange Listed | No |
| NAV Calculation | Varies |
| Redemption Obligation (i.e., liquidity) | Optional |
| Redemption Frequency | Board Discretion |
| Redemption Threshold | Board Discretion |
| Liquidity Requirement | None |
| Eligible Investors | All – No Requirement |
| Minimum Investment (varies by fund) | $1,000 – $50,000 |
| Tax Reporting | 1099 |
BENEFITS
Low investment minimums
No minimum financial suitability requirements
Access to private market strategies
1099 tax reporting
Some liquidity provisions
SEC and ’40 Act investor protections
KEY RISK CONSIDERATIONS
Key risk considerations may include, but are not limited to, the following:
Liquidity: Interval and tender offer funds have limited liquidity, therefore, investors may not receive the amount requested due to oversubscribed redemptions.
Fees: Interval and tender offer fund fees are generally higher than those associated with traditional investments.
Cash drag: Private market investments may take weeks or months to move from identification to acquisition, which can lead to a reduction in fund performance.
Underlying assets and strategy: Each underlying asset and strategy will exhibit their own inherent risks.
Long-term investments: Private market strategies should be considered long-term investments.
Please contact your financial professional or a fund manager to learn more.
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