Learn more about interval funds below. See the latest interval fund news here.
Educational Resources
Gain insight into the key attributes of interval funds, their repurchase structure, and the opportunity they present.
Learn how interval funds work, their key features, and how they differ from other fund types.
In this brief video, gain a foundational knowledge of what an interval fund is.
Learn about the benefits and risks of investing in interval funds, how investors can access their investments, and more.
In this quick guide, Brookfield Oaktree Wealth Solutions offers insight into how interval funds work and their potential benefits.
What is an interval fund?
A type of closed-end fund, an interval fund is a type of investment fund that pools money from investors to invest in a diversified portfolio of securities, often including less liquid or alternative assets such as private equity, real estate, or distressed debt. Unlike traditional open-end mutual funds or exchange-traded funds (ETFs), interval funds offer liquidity to investors only at predetermined intervals (e.g., quarterly or semi-annually), during which investors can redeem or purchase shares. This structure allows interval funds to invest in assets that may require longer holding periods to realize returns while providing investors with access to potentially higher returns, reduced volatility, and enhanced diversification compared to traditional asset classes.
What are the key characteristics of interval funds?
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Liquidity: Unlike traditional open-end mutual funds, which allow investors to buy and sell shares on any trading day at the current net asset value (NAV), interval funds offer liquidity only at certain intervals. This means investors can typically redeem their shares during specified intervals, which may occur less frequently than daily.
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Investment Strategy: Interval funds often invest in less liquid or illiquid assets, such as private equity, real estate, or certain types of debt instruments. This characteristic allows fund managers to take advantage of investment opportunities that might not be available in more traditional mutual funds.
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Regulation: Interval funds are regulated under the Investment Company Act of 1940 in the United States, similar to other types of investment funds. This regulation imposes certain requirements on the fund's operations, including periodic reporting, disclosure, and oversight by the Securities and Exchange Commission (SEC).
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Share Price: Like traditional closed-end funds, interval funds may trade at a premium or discount to their net asset value. However, because interval funds offer periodic liquidity, the discount or premium may be less volatile compared to closed-end funds.
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Minimum Investment: Interval funds may have higher minimum investment requirements compared to traditional open-end mutual funds, given their focus on less liquid investments.
What are the benefits to interval funds?
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Access to Illiquid Assets: Interval funds often invest in assets that are less liquid or not available through traditional open-end mutual funds or ETFs, such as private equity, real estate, or distressed debt. By gaining exposure to these types of assets, investors may access unique investment opportunities and potentially enhance portfolio diversification.
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Reduced Volatility: Because interval funds typically invest in a broader range of assets, including alternative investments, they may exhibit lower volatility compared to funds that focus solely on publicly traded securities. This reduced volatility can help mitigate risk and smooth out investment returns over time.
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Potential for Higher Returns: Investing in less liquid or alternative assets can potentially offer higher returns compared to traditional asset classes like stocks and bonds. Interval funds may provide investors with access to strategies and opportunities that have the potential to generate attractive risk-adjusted returns over the long term.
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Professional Management: Interval funds are managed by experienced investment professionals who can provide investors with access to expertise, research, and resources that may not be available to individual investors.
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Diversification Benefits: Interval funds typically invest in a diversified portfolio of assets across various sectors, geographies, and asset classes. This diversification can help spread risk and reduce the impact of adverse events affecting any single investment or asset class, potentially enhancing overall portfolio stability.
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Stable Income Streams: Some interval funds focus on income-generating assets, such as real estate or fixed-income securities. These funds may offer regular income distributions to investors, making them potentially attractive options for investors seeking stable cash flows or income in retirement.
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Long-Term Investment Horizon: Interval funds are designed for investors with a longer-term investment horizon, as they typically offer liquidity to investors only at predetermined intervals (e.g., quarterly or semi-annually).
What are the risks of interval funds?
Like all investments, interval funds are subject to a variety of risks, including managerial, regulatory, and other risks. However, interval funds present some unique or more pronounced risks due to their structure:
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Liquidity Risk: While all investment funds face liquidity risk to some extent, interval funds specifically offer liquidity to investors only at predetermined intervals, which differs from the daily liquidity typically provided by open-end mutual funds and exchange-traded funds (ETFs).
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Valuation Risk: Interval funds often invest in illiquid assets such as private equity, real estate, or distressed debt, which can be more challenging to value accurately compared to publicly traded securities.
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Redemption Risk: Interval funds typically have restrictions on redemptions, such as limits on the frequency or amount of withdrawals. Open-end mutual funds, in contrast, typically offer daily liquidity without such restrictions.
What interval funds exist today?
A variety of interval funds are currently available in today’s marketplace. Click here to view a complete list of interval funds and explore funds according to net asset value (NAV) return, NAV rank, expense ratio, and other criteria over custom timeframes.
What steps should investors take before investing in interval funds?
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Understand the Fund's Investment Strategy: Investors should thoroughly research and understand the investment strategy of the interval fund, including its asset allocation, target sectors, and geographic focus. This includes gaining clarity on the types of assets the fund invests in, as well as any specific risks associated with those assets.
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Assess the Fund's Performance: Reviewing the historical performance of the interval fund can provide insights into its track record and potential for generating returns. However, past performance is not indicative of future results, so investors should also consider other factors such as the fund's investment process, portfolio management team, and market conditions.
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Evaluate Risks and Considerations: Interval funds come with unique risks which investors should assess to ensure they align with their risk tolerance and investment objectives. Consulting with a financial advisor or investment professional can help investors understand the potential risks and make informed decisions.
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Review Fees and Expenses: Interval funds typically charge management fees, which can impact overall returns. Investors should review the fund's fee structure, including management fees, performance fees, and other expenses, to understand the total cost of investing in the fund and how it may impact their returns over time.
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Consider Investment Horizon: Interval funds are designed for investors with a longer-term investment horizon, as they offer liquidity only at specified intervals. Investors should consider whether their investment horizon aligns with the fund's liquidity terms and whether they can afford to tie up their capital for the duration of the investment period.
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Diversification and Portfolio Allocation: Investors should consider how interval funds fit into their overall investment portfolio and whether they provide diversification benefits. Assessing the fund's correlation with other investments in the portfolio can help investors determine the optimal allocation to interval funds based on their risk-return objectives.
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Seek Professional Advice: Investing in interval funds can be complex, and investors may benefit from seeking advice from a qualified financial advisor or investment professional. A financial advisor can provide personalized guidance, help assess suitability, and address any questions or concerns investors may have before making investment decisions.