Are Interval Funds an Alternative to Hedge Funds?



Who Can Invest in Hedge Funds and Interval Funds

Private or hedge funds are limited to accredited and qualified investors. In the United States, this means a net worth of $1 million excluding personal residence, or $200,000 in income ($300,000 if married filing jointly). Interval funds by contrast are usually open to all investors. There are exceptions to this rule, but typically an interval fund makes previously just about anybody that wants to invest in them. Even with relatively large minimum investments for some funds ($10,000 or more), interval funds are still far more accessible to the public than hedge funds.

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Minimum Net Worth 

To become an accredited investor that can legally invest in a hedge fund an individual must have an annual income of at least $200,000 which is well above the average income in the US. They can also qualify as an accredited investor if their assets exceed $1 million, aside from their home. The reason for this is that the Securities Commission views this type of investor as having the means to mitigate the risk that comes with investing in a hedge fund. The bottom line is that most investors can’t join a hedge fund even if they want to, but they can get involved in an interval fund.