What Is an Interval Fund?
The SEC defines an Interval Fund as a type of Investment Company that periodically offers to repurchase its shares from shareholders. The fund periodically offers to buy back a stated portion of its shares from shareholders. Shareholders are not required to accept these offers and sell their shares back to the fund. Legally, interval funds are classified as closed-end funds, but they are very different from traditional closed-end funds in that:
1. Their shares typically do not trade on the secondary market.
2. Instead, their shares are subject to periodic repurchase offers by the fund at a price based on Net Asset Value (NAV).
3. They are permitted to offer their shares continuously at a price based on the fund’s Net Asset Value (NAV), which many interval funds do.
Interval Funds are investment vehicles that provide individual investors with access to strategies that are typically limited to institutions such as hedge funds and pension plans. These strategies may allocate funds for investment to asset classes that are less liquid, such as commercial real estate, than those typically found in mutual funds, but which strategies offer the potential to generate higher long-term returns.