Interval funds, once a relatively quiet segment of the fund universe, have seen significant growth recently. According to Morningstar, assets under management in interval funds have surged by nearly 40% annually over the past decade, surpassing $80 billion. With an average of 12 new fund launches per year since 2017 and a record high in 2023, there are currently about 100 active interval funds in the market. Similarly, tender offer funds recently eclipsed $60 billion AUM.
This impressive growth and increasing investor interest have understandably caught the eye of asset managers experienced with mutual funds and private market funds. Although interval funds have similarities to both open- and closed-end funds, they have unique characteristics that set them apart. For instance, interval funds do not offer daily redemption. Instead, they allow investors to redeem a portion of their shares at specified intervals. This structure allows for a greater diversity of asset classes, such as private credit, private equity, real estate and other alternatives. Asset managers must remain up-to-date with current trends and best practices to successfully address investor needs and navigate the evolving landscape.
In a recent webinar, we sat down with industry experts to discuss how the past 10 years of growth can help us predict trends for interval and tender offer funds. Our experts foresee the growth to continue exponentially, and they discussed the importance of investing in scalable technology to support that rapid growth. There is an untapped market for selling these products, providing an enormous opportunity for rapid growth. That growth will increase competition, which may lead to fee compression.
Watch the "Navigating Interval and Tender Funds: Expert Insights on Launch and Operational Excellence" webinar recording to hear our panel delve into the key considerations for launching and managing an interval fund, including operational requirements, regulatory compliance and the latest market trends.
