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What Is an Interval Fund?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 24 November 2016
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    Conjecture Corporation
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An interval fund is a type of investment opportunity that blends together various aspects usually associated with other types of investment funds of the open and closed varieties. The end result is that this type of fund provides a number of the benefits associated with a closed fund but also offers the ability to conduct sales and redemptions at specific points or intervals during the life of the fund. This approach allows investors the chance to generate benefits from the investment while also allowing the opportunity to sell off or redeem the fund if there is some concern about the future performance of the assets currently held within the interval fund.

The characteristics of the interval fund typically combine some of the more attractive features of other types of investment funds, including mutual funds. While technically considered to be closed-end funds, an interval scheme does allow investors to sell or redeem the asset as pre-determined periods. In addition, the fund is not traded on any type of secondary market, which is different from more traditional closed-end funds. In addition, purchasing additional shares is allowed just about any time, rather than only allowing investors to buy shares at certain times.

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With an interval fund, the administrators of the fund will extend buy-back offers to investors from time to time. Those offers are usually based on current market rates, and may be higher or lower than what the investors originally paid for the shares. In addition, the offer may not extend to all shares held by a given investor. More often, the offers will specify a specific number of shares that the fund will buy back at a specific rate per share. Investors are not under any obligation to accept those offers and can choose to reject them in favor of holding the shares until the next round of offers occurs.

The frequency of buy-back offers on an interval fund will depend on how the fund is structured, any trading laws and regulations that may govern investment opportunities of this type, and any basis for changing the frequency that is included in the founding documents for the fund. An annual offer is found with just about any type of interval fund, with many providing offers as frequently as every quarter or semi-annual period. Depending on how the interval fund is performing, investors can choose to simply hang on to what they have, buy additional shares from time to time, or take advantage of the buy-back opportunities and allocate the money received from the sale to other types of investments.

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