From Niche to Notable: The Rise of Interval Funds

Insights From the Publisher: Once largely ignored, interval funds now manage more than $106 billion in assets and are primed to keep growing.

By Damon Elder, publisher and editor-in-chief, AltsWire

Interval funds, once relegated to the margins of the investment landscape, have now become a vital entry point to alternative assets for investors. Where once there was only a handful of funds, there are currently approximately 122 active interval funds managing a combined $106.36 billion in assets under management, as of June 2025.

First developed in the 1990s, interval funds are essentially a hybrid between closed- and open-end funds, offering a unique combination of private market access and periodic liquidity. While adoption was slow at first, market volatility, increased regulations, and the increased appetite for non-correlated returns have all contributed to interval funds’ increased appeal. Assets increased nearly 300% between 2018 and 2024, according to research from Citibank. 2024, in particular, was a record year for interval funds, with 80 new U.S. Securities and Exchange filings, a 73% increase from 2023.

As additional evidence for the asset type’s current popularity and according to investment banking firm Robert A. Stanger & Company Inc., interval funds raised $15.4 billion year-to-date through May 2025, a 28.3% increase from $12 billion in the same period of 2024. And Stanger projected that gross fundraising for interval funds could eclipse $37 billion this year.

Structural Advantages

Legally structured as a closed-end fund, interval funds do not trade on an exchange and may invest heavily in illiquid assets. This can allow the fund manager flexibility to allocate to investments such as private markets, assets that typically may only be available through private funds, which often involve higher fees and complicated tax structures.

Unlike closed-end funds, however, interval funds allow for periodic redemptions, often quarterly and sometimes monthly, at net asset value. This structure may provide a more predictable redemption process than tender offer funds, which rely on discretionary board approvals for liquidity events. For investors, this can also be an appealing middle ground between the daily liquidity of public markets and the longer hold periods of many private funds.

Interval funds also typically offer lower minimum requirements, often as little as $25,000, feature no capital calls, and may issue 1099 tax forms, simplifying tax reporting.

Top Interval Fund Strategies

Credit remains the dominant strategy among interval funds, accounting for approximately 66% of all interval funds and more than $70 billion AUM, as of June 2025. Private credit is generally well-suited for the interval fund structure, as most of its underlying assets pay a regular interest coupon and are relatively straightforward to value.

Real estate follows with 16.5% of all interval funds, and equity with 7.7%. Other categories include private equity/venture capital, multi-strategy, and derivatives/insurance-linked securities.

Cliffwater-sponsored interval funds continue to lead the market, according to Stanger, capturing 41% market share across its two funds.

The largest fund by far is the Cliffwater Corporate Lending Fund with nearly $27.85 billion total net assets, more than three times the $8.14 billion for the second-largest fund, the ACAP Strategic Fund.

Investor Benefits and Considerations

For investors, interval funds may offer enhanced access to private markets with a lower minimum buy-in, diversification benefits, and potentially attractive returns. As mentioned, many funds distribute quarterly income and are composed of assets with contractual cash flows, such as floating-rate loans and asset-backed securities, to help further minimize risk.

As with any fund, there are trade-offs, however. Investors may only sell their shares at fixed times, and redemptions are capped between 5% and 25% of the fund’s outstanding shares. If redemption requests exceed the set limit, the fund may take a pro rata approach, in which case shareholders will only be allowed to sell some of their shares, or a fund could possibly eliminate repurchase activities completely. Their hybrid structure may also increase the complexity of an interval fund, and they may have higher management fees than other funds due to their active management and complex structure. According to Morningstar, the average adjusted expense ratio across all interval fund share classes was 2.49%, as of June 2025.

Poised for Growth

Interval funds have carved out a distinct and rapidly growing niche in the investment landscape in recent years. The combination of private market exposure and periodic liquidity creates a semi-liquid asset class that may be compelling to certain investors who are seeking enhanced returns, diversification benefits, and access to previously restricted assets.

As financial professionals and investors both become more familiar with the potential benefits and challenges, interval funds appear poised to continue their upward trajectory through 2025 and beyond.

Damon Elder is the publisher and editor-in-chief of AltsWire, as well as president of Spotlight Marketing Communications. He has worked in the alternative investments industry for nearly 20 years and was previously a congressional aide and political consultant before finding honest work in the private sector. Agree or disagree with what you read here? Share your views with him at [email protected]. Thoughtful replies may be published in AltsWire.

The information provided in this article is for educational purposes only and should not be considered investment advice. Investing in real estate involves risks, and past performance is not indicative of future results. Consult with a qualified financial adviser before making any investment decisions.

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