Interval Fund

How interval funds work

Three mechanics distinguish interval funds from open-end mutual funds and ETFs:

• Periodic repurchase — the fund offers to repurchase between 5% and 25% of outstanding shares at each repurchase date, typically quarterly.
• Proration — if redemption requests exceed the offered amount, requests are filled pro rata. Excess requests are not carried to the next window.
• NAV pricing — repurchases happen at NAV, which is calculated using fair-value methodologies for the less-liquid underlying holdings.

Why interval funds exist

Many institutional asset classes — direct lending, real estate equity, private credit, infrastructure — cannot fit a daily-liquidity wrapper without creating a structural mismatch. Interval funds match the redemption cadence to the underlying liquidity, allowing retail access without the daily-redemption stress that would harm long-term investors during a market dislocation.

What examiners look for

1. Documentation that the client understood the periodic-redemption schedule and the possibility of proration.
2. Suitability of the fund for the client's spending horizon — clients who may need the money in the next 12 months should not own interval funds without a documented exception.
3. Ongoing monitoring of concentration across multiple interval funds with overlapping exposure.
4. Continuous re-suitability as the client's liquidity needs evolve.

Liquidity expectations vs. liquidity reality

The 5%-per-quarter mechanic means that, in a stress scenario where many holders want to exit at once, an investor might recover only 1–2% per quarter for several quarters. Clients who treated interval funds as "quarterly liquid" are sometimes surprised by this. Documentation of the conversation at the recommendation stage is what holds up under examination.

How StratiFi thinks about interval funds

Interval funds are a legitimate way to give clients access to less-liquid asset classes — but the suitability conversation is critical. The firms that recommend them well discuss the redemption mechanics in plain language, document the discussion, and treat each interval-fund position as having a liquidity profile distinct from the rest of the portfolio.