What is an interval fund?
Updated 5 July 2026 · 6 min read
An interval fund is a closed-end fund, registered under the Investment Company Act of 1940, that continuously offers its shares at net asset value and commits in advance to repurchase a set percentage of shares, most commonly 5 percent, at fixed intervals, most commonly quarterly. The structure lets a fund hold illiquid assets while still giving investors a scheduled way out.
Mutual funds promise daily liquidity, which limits how much of their portfolio can sit in assets that take months to sell. Private funds lock capital up for years. The interval fund sits deliberately between the two: it can invest most of its portfolio in illiquid assets such as private credit or real estate, because it never promises to redeem everyone at once. Instead, liquidity arrives on a published schedule.
How the repurchase mechanism works
Interval funds operate under Rule 23c-3 of the Investment Company Act of 1940. The fund adopts a fundamental policy, changeable only by shareholder vote, committing to offer to repurchase between 5 and 25 percent of outstanding shares at net asset value every three, six, or twelve months. Quarterly offers for 5 percent are the most common design. Shareholders are notified ahead of each window and choose how much to tender before the deadline.
If shareholders tender more than the offer amount, the fund repurchases pro rata: everyone gets the same fraction of what they asked for, and the rest waits for the next window. In calm markets most offers go undersubscribed and investors receive everything they tendered. In stressed markets, pro-ration is the mechanism that protects remaining shareholders from a fire sale.
Buying in and getting out
Most interval funds are continuously offered, and many can be bought daily at NAV like a mutual fund. The asymmetry is the point: entry is easy, exit is scheduled. Shares do not trade on an exchange, so there is no secondary market price, no premium or discount, and no way to sell between repurchase windows. Some funds charge a repurchase fee, capped at 2 percent, typically applied to shares held only briefly.
What interval funds hold
The structure exists precisely for strategies that do not fit daily liquidity: private credit and direct lending, real estate and real assets, infrastructure, insurance-linked securities, private equity secondaries, and multi-strategy credit. The interval fund has become the default retail-accessible wrapper for private markets, and new funds have been launching at a record pace.
Fees and taxes
Most interval funds are taxed as regulated investment companies and issue a Form 1099, not a K-1, which is one reason advisors favour the wrapper over partnership-structured alternatives. Expense ratios are typically higher than mutual funds, reflecting the underlying private strategies, and some funds add incentive fees. Because published expense figures layer differently from fund to fund, normalised side-by-side comparison matters more here than almost anywhere else in a portfolio.
The risks that matter
- Liquidity mismatch: the fund is only as liquid as its repurchase policy. Plan around the windows, not around the daily purchase convenience.
- Pro-ration: in a stressed quarter you may only get a fraction of what you tender, repeatedly.
- Valuation: illiquid holdings are fair-valued rather than market-priced, so NAV moves more smoothly than the underlying assets truly do.
- Cost: multiple fee layers can sit between the strategy’s gross return and the investor.
Interval fund vs mutual fund vs tender-offer fund
Against a mutual fund, the trade is liquidity for asset access: an interval fund cannot be exited daily, but it can hold what a mutual fund cannot. Against a tender-offer fund, the difference is certainty: an interval fund is obligated by policy to make its periodic repurchase offers, while a tender-offer fund’s board decides each time whether to offer liquidity at all.
Common questions
How often can I get my money out of an interval fund?
At the intervals set in the fund’s repurchase policy: every three, six, or twelve months, with quarterly being the most common. Each offer covers a set percentage of the fund’s shares, most commonly 5 percent, at net asset value. Between windows there is no way to sell, because the shares are not listed on an exchange.
Can an interval fund refuse to buy back my shares?
It cannot skip the offer: the repurchase schedule is a fundamental policy under Rule 23c-3 and the fund is obligated to make each offer for at least 5 percent of shares. But if investors collectively tender more than the offer amount, the fund repurchases pro rata, so you may receive only part of what you asked for in any single window.
What is the difference between an interval fund and a mutual fund?
A mutual fund redeems shares every business day, so it must hold mostly liquid assets. An interval fund only repurchases shares at set intervals, typically quarterly, which frees it to invest most of its portfolio in illiquid assets such as private credit, real estate, or private equity. Both are 1940 Act funds priced at NAV; the difference is when you can leave.
What is the difference between an interval fund and a tender-offer fund?
An interval fund is contractually committed to a repurchase schedule: set percentage, set frequency, by fundamental policy. A tender-offer fund makes repurchase offers only at its board’s discretion, so liquidity is expected but never guaranteed. In practice many tender-offer funds also target quarterly offers, but the obligation sits with the board, not the policy.
Do interval funds issue a 1099 or a K-1?
Most interval funds are taxed as regulated investment companies and issue a Form 1099, which keeps tax reporting as simple as a mutual fund’s. That is one of the structure’s practical advantages over partnership-based private funds, which issue K-1s.
Educational content by Kesta, the neutral data layer for liquid and semiliquid alternatives. Not investment, legal, or tax advice. Keep learning: What is a tender-offer fund? · What is a BDC? · What is a REIT? · all guides · fund directory.