Private credit, commercial real estate debt, and small buyout loans have historically been walled off behind accredited-investor minimums of $250,000 or more. Now a fund structure created in 1993 is letting ordinary investors buy in with four-figure minimums — but the fine print decides when you get your money back. Before you invest a dollar in an interval fund, you need to understand the repurchase window, because it is a mechanism for liquidity, not a promise of it.
What an Interval Fund Actually Is
An interval fund is a type of closed-end fund registered under the Investment Company Act of 1940. Unlike a mutual fund, it never offers daily redemptions. Unlike a traditional closed-end fund, its shares do not trade on an exchange at all — there is no ticker to sell into on a bad day.
Instead, the fund continuously offers new shares to the public at net asset value (NAV), and it buys shares back from investors only during periodic repurchase offers. The whole structure runs on SEC Rule 23c-3, adopted in 1993, which lets the fund repurchase shares at NAV under a board-approved policy without running each buyback as a formal issuer tender offer.
That trade — giving up daily liquidity in exchange for access — is the entire point. Open-end mutual funds may hold no more than 15% of net assets in illiquid investments, which shuts them out of most private-market strategies. Interval funds face no such cap beyond keeping enough liquidity to honor their repurchase offers, so they can load up on private credit, real estate loans, asset-backed lending, and other strategies a mutual fund cannot touch.
The format has grown fast. The SEC reports that interval funds grew from 58 funds holding $38 billion in 2020 to 139 funds holding $101 billion in 2025, as asset managers raced to package private-market yield for a retail audience.
How the Repurchase Window Works
Every interval fund adopts a fundamental policy, approved by its board, that fixes two numbers: how often it offers to buy back shares, and how much it offers to buy.
The interval. Repurchase offers must come every three, six, or twelve months. Quarterly is by far the most common, which is why you will often hear interval funds described as offering "quarterly liquidity."
The amount. Each offer must cover at least 5% and no more than 25% of the fund's outstanding shares. Most funds set their policy near the 5% floor — enough to satisfy the rule while keeping the portfolio invested. The exact figure is disclosed in the prospectus, and it matters enormously, as the next section explains.
The mechanics. For each offer the fund mails or posts a repurchase request deadline, prices tendered shares at NAV, and pays proceeds within days of pricing. You submit your request by the deadline; there is no intraday trading, no limit order, and no negotiating the price. You get NAV — the same per-share value used for new subscriptions.
The cash cushion. Under the current rule, the fund must hold liquid assets equal to 100% of each repurchase offer amount from the time shareholders are notified until the pricing date. That drag is part of what you pay for: a slice of your "private credit" fund sits in cash or liquid securities around every window.
The 5–25% Catch: Proration
Here is the sentence that should be in bold in every interval fund brochure: an oversubscribed repurchase offer is filled pro rata, and the shares the fund does not buy wait until the next window with no priority over anyone else.
Work through what that means. Suppose a fund with a 5% quarterly policy holds $1 billion in shares. This quarter it offers to repurchase $50 million. If shareholders tender $200 million — four times the offer — every request is cut to one quarter. You asked to exit $40,000 and you receive $10,000; the remaining $30,000 stays invested, and next quarter you join the back of the same line with no preference.
This is not a hypothetical edge case. In early 2026, several non-traded business development companies and registered closed-end funds, including interval funds, saw shareholders tender more shares than the funds had offered to repurchase. When sentiment turns and everyone heads for the same narrow door, "quarterly liquidity" becomes a series of partial fills stretched across many quarters — which is why your money can wait years.
Before investing, read the fund's repurchase history in its shareholder reports. A fund that has prorated before will almost certainly prorate again in a stress episode, and the prospectus tells you the policy percentage that sets the size of the door.
NAV Pricing: No Discount, No Premium — and No Market Check
Listed closed-end funds routinely trade at discounts or premiums to NAV, sometimes wide ones. Interval funds sidestep that entirely: with no secondary market, every transaction — subscriptions in, repurchases out — happens at NAV.
That sounds clean, but notice what it removes: the market's second opinion. A listed fund trading at a 12% discount is telling you something about what buyers think the portfolio is worth. An interval fund's NAV for illiquid holdings rests on the adviser's valuation process — appraisals, pricing models, and board-approved fair-value procedures — with no live bid to confirm or contradict it.
This cuts both ways. You never buy at a premium or sell into a panic discount. But you are trusting the valuation machinery, so check the prospectus for how often NAV is struck (many funds strike daily even though you can only exit quarterly), who values the hard-to-price holdings accountants call Level 3 assets, and whether an independent valuation firm is involved. Smooth NAV charts for portfolios of illiquid loans deserve a skeptical look, not an admiring one.
Interval Funds vs. Tender-Offer Funds
You will often see these two mentioned together, because both are unlisted closed-end funds offering limited liquidity. The difference is who decides when you can sell.
In an interval fund, repurchases follow the fixed fundamental policy — the schedule and the 5–25% band are commitments, and shareholders can plan around them. In a tender-offer fund, redemptions happen only when the fund's board chooses to make a tender offer, at whatever terms it sets. The board can skip quarters entirely.
That extra flexibility lets tender-offer funds hold even more illiquid portfolios, and they frequently cater to accredited or qualified investors rather than a retail audience. If you are comparing two "semi-liquid" private-market funds, the first question is which structure each one uses — a discretionary tender program is a weaker liquidity promise than a fixed interval policy, whatever the marketing emphasizes.
What They Cost and Who They Fit
Interval fund fees generally run higher than plain mutual funds or ETFs, and the layers stack: a management fee on gross or net assets, often an incentive or performance allocation borrowed from the private-fund world, servicing fees on retail share classes, plus acquired fund fees if the strategy nests other vehicles. A 2%-plus all-in expense load is common before any incentive cut. Read the fee table in the prospectus, not the headline yield — the yield is quoted before some of these layers take their share.
Minimums, on the other hand, are the genuine democratization story: many interval funds accept initial investments of $1,000 to $25,000 through brokerage platforms, with no accredited-investor requirement. Compare that with a direct private credit fund demanding accredited status and six-figure commitments, and the appeal is obvious.
The fit test is time horizon plus cash-flow planning. Money you might need within two to three years does not belong here — a prorated window can strand it far longer than one quarter. Money you can leave untouched for five-plus years, where you value yield and diversification over control of exit timing, is the natural candidate. And size the position knowing the door is narrow: many advisers treat interval fund allocations as effectively long-term capital with a hopeful quarterly option, not as a liquid reserve.
One administrative plus: many interval funds are structured as regulated investment companies that issue a Form 1099 rather than the Schedule K-1 common in direct private partnerships — simpler tax paperwork, though you should confirm the fund's tax reporting in its documents rather than assuming it.
Tracking Interval Fund Holdings on Your Own Books
Whether you hold one fund or several, record the position the way its economics actually work: purchases at NAV, distributions as income, and repurchase proceeds as partial sales against cost basis. A plain-text ledger keeps the history auditable across years of prorated windows:
2026-01-15 * "Buy 1,000 shares XYZ Interval Fund at $25.00 NAV"
Assets:Brokerage:Interval-Funds:XYZ 1,000 XYZ @ 25.00 USD
Assets:Brokerage:Cash -25,000.00 USD
2026-04-20 * "Quarterly distribution, $0.42/share"
Assets:Brokerage:Cash 420.00 USD
Income:Investments:Interval-Fund-Distributions -420.00 USD
2026-07-25 * "Q3 repurchase: tendered 400 shares, 250 accepted pro rata at $25.40 NAV"
Assets:Brokerage:Cash 6,350.00 USD
Assets:Brokerage:Interval-Funds:XYZ -250 XYZ @ 25.00 USD
Income:Investments:Capital-Gains -350.00 USDNote the third entry: only the accepted shares leave the position, at your original cost basis, with the NAV gain booked explicitly. When proration stretches an exit across four windows, this running record is what keeps your cost basis honest — your brokerage statement shows transactions, but the ledger shows the story. The Beancount documentation covers booking investment lots and capital gains in more depth, and visualizing the position over time is where Fava earns its keep.
A Checklist Before You Buy
Run every candidate fund through these questions, with the prospectus — not the fact sheet — open in front of you:
- What is the repurchase policy? Quarterly at 5% is the weakest common promise; semiannual or annual windows at the same percentage are weaker still.
- Has any offer ever been oversubscribed? Past proration is the best predictor of future proration.
- What is the all-in cost? Add management fee, servicing fees, and any incentive allocation, then compare the net yield with liquid high-yield alternatives.
- How is NAV set? Daily striking, independent valuation input, and clear Level 3 procedures beat quarterly appraisals by the adviser alone.
- Does the fund use leverage? Borrowed money magnifies both the yield you were shown and the drawdown you were not.
- What is the distribution coverage? A distribution partly funded by return of capital is your own money coming back with a yield label on it.
Interval funds are a reasonable bridge into private markets for patient capital — scheduled windows, NAV pricing, and retail minimums are real improvements over the old accredited-only world. Just size the allocation for the worst case the prospectus allows: a 5% door, a crowded exit, and your remaining shares waiting for the next window. If the investment still makes sense under those terms, you understand what you are buying.
