Interval fund

An interval fund is registered under the same Investment Company Act as a mutual fund, but it does not redeem shares on demand. Instead the fund’s board offers to repurchase between 5% and 25% of outstanding shares each quarter, under SEC Rule 23c-3, and pays pro rata if more shareholders ask to sell than the offer covers. That structure lets the fund hold assets that do not trade daily, most often private credit or real estate, without promising liquidity it cannot deliver.

Cost runs higher than a listed fund. Cliffwater’s Corporate Lending Fund, named as an example of the mechanism, prices its Class I shares at a 1.00% management fee, 0.25% of acquired fund fees, and 0.27% of other expenses, 1.52% in total before financing; interest on the fund’s own borrowed money adds another 1.75%, for 3.27% all in. Most interval funds land somewhere in the 150 to 300 basis point range on the expense line alone.

Income from a credit-focused fund is mostly ordinary, some years include a capital gain distribution, and the fund reports it on a 1099 rather than a partnership K-1. That fits a taxable account, an IRA, or a Roth; a 401(k) plan rarely offers one. Minimums range from $2,500 on a retail share class to seven figures on an institutional one. The fund cannot be sold in full on short notice, so tracking its stated value against what it could actually fetch in a forced sale is hard, and an investor who needs cash faster than the quarterly window allows has a real problem, which is why both tracking and behavior risk are rated high here.