interval funds

What is an interval fund?

An interval fund is a type of fund that provides liquidity to shareholders by making regularly scheduled offers to repurchase shares from investors at the fund’s net asset value (“NAV”).  Some funds may apply a repurchase fee and terms are subject to approval of the fund’s Board of Trustees. For all interval funds, such repurchases will be for at least 5% and not more than 25% for the fund’s outstanding shares.

It is possible that an interval fund may offer to repurchase only the minimum amount of 5% of its outstanding shares. It is also possible that a repurchase offer may be oversubscribed; that is, shareholders have requested redemptions of more shares than the fund has declared it will repurchase. When that happens, interval fund shareholders may only be able to have a portion of their shares repurchased.

Even though an interval fund may provide liquidity to shareholders by making offers to repurchase a portion of the shares, investors should consider fund shares to be illiquid. An interval fund’s shares are typically not listed on a national securities exchange. A secondary trading market for interval fund shares typically is not expected; therefore, fund shares typically are not readily marketable.

Interval funds are legally classified as closed-end funds though they are very different from traditional closed-end funds. In addition, prospective investors should carefully evaluate the costs of interval funds as they can have higher expenses than other closed-end funds and mutual funds.