Some of the best performing investments of the last twenty years have been private funds, alternative investment classes like real estate or natural resource development programs, and hedge funds. Many top portfolio managers are attracted to these asset classes and structures for their flexibility and the opportunity to participate with fund performance fees. Private funds are not available to the public, however, due to restrictions under the Investment Company Act limiting hedge and private funds to accredited and qualified investors, determined by income and net worth.
Closed end interval funds are a relatively new structure that can make these investment structures available to a wider group of investors. From an investment standpoint, alternative investments that contain relatively illiquid assets, such as real estate, private debt securities, development programs and other private or hedge funds, daily liquidity is not an option. Traditional mutual funds require daily liquidity. Closed end interval funds are a hybrid. New shareholders and new investment are accepted continuously, but redemptions are limited to once per month or once per quarter, depending upon how the prospectus is written.