Non-traditional closed-end interval and tender offer funds constitute an important segment of the investment industry.

Closed-end funds’ regulatory and investment features straddle between private funds (e.g., private equity and hedge funds) and open-end funds (e.g., mutual funds and exchange-traded products). Their unique structure allows asset managers to deliver alternative and illiquid investment strategies to a broad investor base.

In their recent whitepaper, Product Spotlight: Interval and Tender Offer Funds, our friends at Foreside discuss the regulatory framework and operational considerations associated with unlisted closed-end funds.

The historical market growth of closed-end funds continues to be supported by a mutually beneficial supply and demand relationship between asset managers and investors. On the supply side, asset managers can utilize the closed-end fund structure to package less liquid and alternative investment strategies to access a new investor base not currently served by their product offerings.


Key takeaways:

  • Asset managers who are new to closed end funds will need to familiarize themselves with their peculiar regulatory standing. Many of the regulatory requirements that apply to private funds, mutual funds, and ETFs do not apply to closed-end funds, and vice-versa.
  • Asset managers will naturally cultivate success through a commitment to education, patience in the market, and thorough appreciation for the complexities and fees associated with making the product available.
  • Closed-end funds allow asset managers to efficiently manage investor redemptions with predetermined liquidity windows and therefore are better suited to hold illiquid or alternative investments that may have longer holding periods.
  • The creation of a retail product by an alternative asset manager allows access to an untapped group of investors. With a previous focus on institutional clients and accredited investors, the vast number of potential investors is enticing.

The full paper can be found here, shared with their permission.