How to Access Private Markets with Interval Funds
Let's explore how interval funds work — and how they're opening the doors to private market investing.
Private markets have long been the playground of institutional investors — endowments, pensions and ultra-high-net-worth families.
In the past, the barriers to entry for the typical individual investor have been enormous due to high minimum investment requirements, limited liquidity and complex fund structures. But today, that wall is coming down.
Thanks to the evolution of fund structures like interval funds, everyday investors and their advisors now have access to private equity, private credit, real estate and other less-liquid alternative strategies. The result? A more diversified portfolio, the potential for higher returns and greater resilience in volatile markets.
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Let’s explore how interval funds work — and how they’re opening the doors to private market investing.
What are interval funds?
To begin, interval funds are a hybrid investment vehicle that combines features of both open-end mutual funds and closed-end funds. They are registered under the Investment Company Act of 1940, just like traditional mutual funds, and are regulated by the Securities and Exchange Commission (SEC).
Interval funds allow investors and their advisors the ability to explore strategies and asset classes with lower liquidity or higher complexity, often in private markets. But unlike mutual funds, they do not allow for daily redemptions.
Instead, they offer to repurchase a percentage of outstanding shares at set intervals — usually quarterly — at net asset value (NAV).
Why use interval funds to access private markets?
Private markets can offer attractive long-term return potential. That’s often due to an investment principle called the illiquidity premium, the idea that investors who are willing to accept less liquidity may be rewarded with higher returns over time.
As mentioned, historically, accessing private markets required large investment contributions and long lock-up periods (very patient capital) with high fees. Interval funds have changed the game for everyday investors interested in private equity. Here’s how:
Lower minimums. Investors can now access institutional-quality private investments without committing millions.
Simplified structure. Unlike private placements, interval funds don’t require complex subscription documents or long negotiations.
No performance fees (in some cases). Certain interval funds — particularly those investing in co-investments — may forgo performance fees, which are standard in private equity funds.
Built-in diversification. Investors can gain exposure to multiple sectors, such as private real estate, private credit or infrastructure — all in a single fund.
Key benefits of interval funds
Interval funds provide several benefits for long-term investors looking to diversify and stabilize their portfolios beyond access just to private markets.
Access to complex strategies. Fund managers can invest in less liquid, higher complexity investments that may offer greater return potential.
Reduced correlation. These funds tend to behave differently from stocks and bonds, which may lower overall portfolio volatility.
Opportunistic capital deployment. With a long-term focus, managers are better positioned to take advantage of dislocations in private markets.
Professional management. Like mutual funds, interval funds are actively managed and transparent, issuing 1099s for tax reporting.
For investors looking to reduce public market exposure, or access the 17,000 large private companies and nearly 200,000 midsize private companies in the United States, interval funds can be a viable option.
What’s under the hood?
Many interval funds are built around one or more of the following strategies:
Private equity. Investing in privately held businesses, either directly or through funds
Private credit. Lending to businesses outside traditional banking systems, often at higher yields
Real assets. Exposure to real estate, infrastructure or farmland
Special situations. Co-investments, distressed assets or niche strategies
Fund strategies vary widely, and it’s critical to understand what types of private investments your fund is targeting. Equally important is due diligence. Before investing, make sure to review the fund’s prospectus, performance history, fee structure and redemption terms.
Understand the liquidity trade-off
Liquidity is both the strength and limitation of interval funds. On one hand, limited redemptions empower managers to hold private investments that aren't suitable for daily trading.
On the other hand, investors can only redeem a portion of their shares at predetermined intervals — typically 5% to 25% of the fund’s outstanding shares.
This means that interval funds are not a fit for short-term cash needs. They should be treated as long-term holdings, with redemption requests submitted during specified “windows.”
If too many investors request redemptions at once, allocations are made on a pro-rata basis, and not all requests may be fulfilled.
Final thoughts
Interval funds can be a powerful tool in the hands of disciplined investors. Interval funds are well-suited for investors who are comfortable with limited liquidity, looking for alternatives to public markets, seeking enhanced income or return potential and interested in accessing private markets but unwilling or unable to commit to traditional private equity lock-up periods.
They create accessibility to private markets, allowing more investors to tap into the growth, diversification and income potential that institutions have leveraged for decades.
If your current investment approach feels too dependent on public markets and you are interested in investing in the potential benefits of private equity (i.e., diversification, alignment of investor interests and historical superior performance), this may be the right time to explore how interval funds could help you build a more resilient, forward-thinking portfolio.
Related Content
- Why Retail Investors Are Embracing Private Markets
- Two Paths to Reliable Retirement Income in Volatile Times
- Getting Started in Private Market Investment
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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