An interval fund is a type of closed-end investment company that periodically offers to buy back a portion of its shares from investors, rather than allowing daily redemptions like a traditional mutual fund. These funds are designed to hold illiquid assets like private credit, real estate, and other alternatives that don’t trade on public exchanges. The tradeoff for accessing those investments is straightforward: you can’t cash out whenever you want.
How Interval Funds Work
Interval funds sit in an unusual middle ground between open-end mutual funds and traditional closed-end funds. You can buy shares on any business day at the fund’s net asset value (NAV), just like a mutual fund. But selling is a different story. Instead of redeeming shares whenever you choose, you wait for the fund to make a repurchase offer at a scheduled interval, typically every three months, though some funds offer repurchases every six or twelve months.
When a repurchase window opens, the fund offers to buy back between 5% and 25% of its outstanding shares at NAV. You submit a request during the offer period, and if total requests exceed the amount the fund is willing to repurchase, your redemption gets prorated. That means if the fund offers to buy back 5% of shares and investors collectively want to sell 10%, you’d only get half your requested amount filled. The remaining shares stay in your account until the next repurchase window.
The repurchase price is based on the fund’s NAV calculated on a specific date disclosed in the offer, generally no more than 14 days after the deadline for submitting your request. Funds are also permitted to charge a redemption fee of up to 2% on the proceeds, though not all funds impose one.
What Interval Funds Invest In
The whole reason interval funds exist is to give everyday investors access to asset classes that are hard to buy and sell quickly. Because the fund doesn’t need to meet daily redemption requests, it can put a larger share of its portfolio into illiquid holdings that would be impractical for a standard mutual fund.
Common holdings include private credit (loans to companies that aren’t publicly traded), commercial real estate, farmland, infrastructure projects, venture capital stakes, and other alternative investments. These assets often generate income or returns that aren’t closely correlated with the stock market, which is a big part of their appeal. A traditional mutual fund would struggle to hold a meaningful allocation to, say, direct commercial real estate loans, because it would need the ability to liquidate those positions on short notice if investors wanted out. The interval structure removes that pressure.
Fees and Costs
Interval funds tend to be more expensive than index funds or most actively managed mutual funds. Base management fees typically range from 1.00% to 1.50%, with an average around 1.19%. On top of that, some funds carry additional expenses, performance-based fees, or sales loads that push the total cost higher. Before investing, check the fund’s prospectus for its total annual operating expense ratio, which captures all ongoing costs in a single number.
The higher fees reflect the specialized nature of the underlying investments. Managing a portfolio of private loans or direct real estate holdings requires more work than running a stock portfolio, and fund managers price accordingly. Whether those fees are justified depends on the returns the fund delivers after all costs are subtracted.
Liquidity Limits and Key Risks
The biggest risk with interval funds is limited liquidity. Unlike exchange-traded funds or mutual funds, interval fund shares generally don’t trade on a stock exchange or any secondary market. Your only reliable exit is through the fund’s periodic repurchase offers, and even then, you may not be able to sell as many shares as you’d like if demand exceeds the offer amount. If you need access to your money on short notice, an interval fund is the wrong vehicle.
Because the underlying assets are illiquid, valuing them precisely is also harder than pricing publicly traded stocks or bonds. The fund calculates NAV based on its best estimates, but those valuations can lag real market conditions. In a downturn, the stated NAV might not fully reflect losses that have already occurred in the portfolio.
There’s also concentration risk. Many interval funds focus on a single asset class, like private real estate or private credit. If that sector hits trouble, the fund has limited ability to quickly shift into something else, and you have limited ability to get out.
Who Interval Funds Are Designed For
Interval funds are regulated under the Investment Company Act of 1940 (specifically Rule 23c-3), which means they’re available to the general public, not just accredited or institutional investors. That distinguishes them from hedge funds and most private equity funds, which require high income or net worth thresholds. Minimum investments vary by fund but are often in the range of $2,500 to $25,000.
That said, accessibility doesn’t mean suitability. These funds make the most sense for investors with a long time horizon who want exposure to alternative asset classes and are comfortable locking up a portion of their portfolio for months or years. If you’re building an emergency fund or saving for a near-term goal, the redemption restrictions alone make interval funds a poor fit. They work best as a smaller allocation within a broader, diversified portfolio where the rest of your holdings provide the liquidity you need for everyday life.
Buying and Selling Shares
You can purchase interval fund shares directly from the fund company or through a brokerage account, depending on the fund. Shares are typically available for purchase daily at NAV, similar to a mutual fund. Some funds offer multiple share classes with different fee structures, so compare the expense ratios and any upfront or deferred sales charges before choosing.
When it’s time to sell, watch for the fund’s repurchase offer announcements, which are required to be disclosed in the prospectus and annual report. You’ll have a window of time to submit your request. If the offer is oversubscribed, your redemption will be scaled back proportionally, and you’ll need to wait for the next window to try again. Plan your exit well in advance, because getting fully out of a large position can take multiple repurchase cycles.