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BLOG. 2 min read

Closed End Interval Funds: The Convergence of Retail Alternatives

Closed End Interval Funds (CEF Intervals) are an interesting case study in the expanding market of retail alternatives. The versatile product wrapper enables product managers to build a strong, limited liquidity alternative portfolio, yet still has the '40 Act characteristics that allow it to access a broader and deeper range of retail investors than most alternatives. These characteristics have driven intervals to be the primary product that opens the door for retail alternatives convergence.

Over the last several years, the industry has shifted and the convergence has begun. Traditional '40 Act Mutual Fund sponsors are actively looking to get into retail alternatives structures using the CEF Interval fund wrapper as their first step into the trading pool. At first glance, its similarities across the '40 Act structure allow it to mesh into most of its existing teams and structures. These similarities position the '40 Act sponsor for a strong launch in a retail alternative product without completely revamping their team. Additionally, we are seeing more private equity and hedge fund managers utilizing the CEF Interval structure as well. For them, it’s an opportunity to take the winning strategies that they developed in accredited or private offerings, and expand their success into a retail distribution model. Private sponsors see the potential of using their strong knowledge and history of alternatives success to position them well to make an impact in the retail market through the CEF Interval wrapper.

The versatility of these wrappers is exactly why the different product sponsors are coming together in this market at such a rapid pace. However, each sponsor faces its own set of unique challenges as they determine to move forward with such a structure. For as strong as the mutual fund sponsor may be in '40 Act, they need just as much potential guidance and input on the alternative realities across the portfolio and operational functions.

  • How do you fold in the complex valuations, and unique challenges of alternative investments into their '40 Act structure?
  • How do you navigate arduous legal review, and expanded scrutiny of real estate and illiquid credit structures, or even tokenization strategies?
  • How do you manage the repurchase and its gatekeeping, and technology requirements to meet the arduous repurchase regulations?

While hedge funds and private equity can conquer the portfolio and securities strategies, getting a foot in the door for large retail distribution can be incredibly challenging. Just because you trade now at large firms for your hedge fund, that does not mean you will land distribution on their retail platform. How does a smaller successful firm navigate the expanded compliance, distribution, and 40 Act administration and operational requirements your team has never had to conquer?

The answer is a strategic partnership. You must find a solution-driven leader in the industry with the knowledge, experience and strength to help you firmly establish your new limited liquidity strategy. By partnering with SS&C, you are onboarding a partner that has been through it all. With over ~60% of the CEF Interval industry utilizing our services, we have the market strength and industry experience to help the largest or smallest firms succeed. Our experts across administration, legal, tax, compliance and operations are industry leaders who will help you navigate the nuances of the CEF Interval fund, and implement a successful strategy. Let us focus on the alternative or '40 Act complexities that have always been our strength and focus, while you and your team focus on what has already made you successful. To learn more about our interval fund capabilities, view our "Interval Funds" brochure.

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