Interval funds 101: How to diversify with private market investments

Interval funds have been gaining popularity in recent years as investors search for alternative sources of diversification, especially after witnessing high correlation among traditional asset classes. Also, the enhanced return potential of this less-liquid investment vehicle can be attractive to many long-term investors. In fact, interval funds recorded $13.2 billion net inflows in the second quarter of 2025 – with net asset growth of $43 billion year to date and overall net assets at $215 billion (as of 9/30/2025).¹

Here, we explain what interval funds are, how they compare to other investment vehicles such as mutual funds and traditional alternatives, and why they may be a compelling option.

Key takeaways:

• Interval funds provide access to private market asset classes that have traditionally been available to only institutional investors.
• Diversification potential of interval funds may help long-term investors build more efficient portfolios.
• Periodic liquidity of interval funds versus daily liquidity of mutual funds provides flexibility to invest in a broad range of alternatives such as private credit, infrastructure, real estate, and private equity.

What are interval funds?

Interval funds are a type of investment vehicle designed to give individual investors access to private markets typically reserved for institutions – such as private credit, real estate, and other less-liquid alternatives. Structured as SEC-registered, non-exchange-traded closed-end funds, interval funds offer a blend of professional management, diversification, and, very importantly, periodic liquidity.

What are potential benefits of the interval fund structure?

• Diversification: Interval funds offer exposure to a wide range of asset classes, which can help diversify an investment portfolio.
• Potential for higher returns: By investing in less-liquid assets, interval funds have the potential to offer higher returns compared to traditional mutual funds.
• Potential for portfolio risk reduction: When adding private market investments to a diversified portfolio, the portfolio may benefit from reduced standard deviation due to the introduction of uncorrelated or lower correlated assets into the portfolio.
• Professional management: Interval funds are actively managed by professional investment managers who typically have private markets expertise.

Access to illiquid assets: Alternatives

Interval funds blur the line between public and private markets. They have the flexibility to invest in private market assets that are typically unavailable in daily-liquid mutual funds or exchange-traded funds (ETFs), such as private credit or loans, infrastructure, or distressed debt. This flexible structure enables investors to gain access to these alternative investment exposures while still offering liquidity (but limited) through periodic repurchase offers at the fund’s net asset value (NAV). In addition, you can purchase shares in an interval fund on a daily basis at NAV, similar to a mutual fund.

Liquidity and periodic repurchases

Interval funds do not offer daily liquidity, so you can’t just sell your shares whenever you want to. Instead, they provide periodic repurchase offers, typically ranging from 5% to 25% of the fund’s outstanding shares – most commonly 5% and on a quarterly basis. Investors are notified at least 21 days in advance of the repurchase window, during which time they can submit redemption requests. If requests exceed the repurchase limit, redemptions are fulfilled on a pro-rata basis. This structure allows investment managers to invest in longer-term, less-liquid assets without the pressure of daily redemptions, while still offering investors a path to liquidity.

Risks and considerations

Due to the flexible structure enabling interval funds to invest in alternatives, there are varying risks to consider, including:

• Liquidity risk: Since redemptions are limited to specific intervals, investors may face liquidity constraints in any given quarter and also face uncertainty regarding the timing of full liquidity requested.
• Valuation risk: The valuations of illiquid assets may not be as accurate as those of liquid assets due to certain complexities. However, valuation accuracy is a core capability of leading asset management firms that have established a rigorous valuation framework.
• Fees: Interval funds may have higher fees compared to traditional mutual funds and ETFs due to the complexity of managing alternative assets. The average base management fee is 1.23% as of 9/30/25, according to XA Investments research.

Comparison of interval funds to traditional alternatives and mutual funds

Because of the specialized types of investments within interval funds, liquidity, complexity, management fees and expenses are typically higher than the average mutual fund or ETF – but often lower than those of other private investment structures such as limited partnerships (LPs) or direct investments in a company, real estate, or infrastructure development. Similarly, interval funds broaden access to investments that were typically only available to qualified purchasers or accredited investors.