Interval Funds: The Underappreciated Workhorse of US Semi-Liquid Private Markets
US interval funds have grown to roughly $106bn in AUM as of mid-2025, approximately 4x their size five years earlier. Less discussed than non-traded BDCs but structurally different in important ways, interval funds have become the preferred wrapper for a broader range of semi-liquid private markets strategies — and the differences matter.
An interval fund is a 1940 Act registered investment company that periodically offers to repurchase a specified percentage of its shares at NAV. The repurchase intervals are defined in the fund's prospectus, typically quarterly at 5-25% of outstanding shares. This is materially different from both traditional open-end mutual funds (daily redemption) and closed-end funds (no redemption from the fund itself).
What makes interval funds structurally different from BDCs
Both are 1940 Act structures. Both offer semi-liquid exposure to private markets. The differences that matter:
Leverage capability. Interval funds can use leverage but typically do so conservatively — often 0-30% of assets. BDCs routinely operate at 100-150% debt-to-equity. This is the single largest structural difference and drives much of the risk profile distinction.
Strategy flexibility. Interval funds can hold essentially any asset class. BDCs are constrained to eligible portfolio companies under the 1940 Act (primarily US middle-market operating companies). Interval funds can hold secondaries, infrastructure, real estate, PE, credit, venture capital, collectibles, and more within a single vehicle.
Distribution requirements. Interval funds are not required to distribute 90% of income (this is a BDC/RIC requirement specifically). Interval funds can pursue total-return strategies without distribution mandates, enabling portfolio construction more aligned with compounding than with yield delivery.
Reporting cadence. Both file standard 1940 Act disclosures, but interval funds typically publish daily NAVs while BDCs often publish monthly NAVs for non-traded share classes.
Where interval funds dominate
The structure has become particularly dominant in several strategies:
1. Evergreen secondaries. Interval funds are the preferred wrapper for semi-liquid secondaries vehicles, including several of the largest in the market (StepStone, Hamilton Lane, Partners Group, and similar).
2. Multi-strategy private markets. Interval funds can hold mixed portfolios of PE, credit, real estate, and infrastructure in proportions that would be structurally difficult in other wrappers.
3. Real estate credit. Commercial mortgage REITs and real estate credit funds are frequently structured as interval funds.
4. Venture capital access. The handful of retail-accessible venture capital strategies are generally interval funds, leveraging the structure's flexibility on illiquidity.
5. Specialty credit and asset-based finance. Managers targeting asset-based finance often prefer the interval fund wrapper for its flexibility on deployment cadence and reporting.
What the structure delivers
Broad strategy access within a 1940 Act wrapper. Wealth channel advisors can access strategies through interval funds that would otherwise require closed-end fund or alternative structures.
Reasonable liquidity terms. Most interval funds offer 5-10% quarterly repurchase windows. Some offer 25% quarterly windows. Annual total liquidity availability is generally higher than BDC repurchase programs offer.
Low leverage. The conservative leverage profile makes interval funds structurally less volatile than leveraged BDCs during credit and market stress.
Daily NAV transparency. Daily pricing supports client reporting, rebalancing, and comparability with public market alternatives.
No distribution mandate. Strategies focused on total return rather than yield delivery can compound rather than distribute, with tax efficiency benefits for some investor situations.
Where the limits are
Subscription and redemption friction at major platforms. Interval funds are operationally more complex than mutual funds at some wealth platforms. Platform integration has improved dramatically but remains inconsistent across channels.
Smaller than BDCs in aggregate. The $106bn category is meaningful but less than one-quarter the size of non-traded BDCs. Manager selection breadth is narrower.
The same semi-liquid tensions. Gating, NAV smoothness, and the gap between reported NAV and transaction reality all apply similarly to interval funds as to BDCs.
Fees remain meaningful. Interval fund fee structures are generally lower than non-traded BDCs but still substantial — typically 1.25-1.75% management fees plus performance fees on strategies that warrant them.
The 2022-2024 experience
Interval funds, broadly, came through the recent cycle better than leveraged BDCs — primarily because of the leverage differential. Real estate-focused interval funds experienced gating similar to non-traded REITs. Credit-focused interval funds held up well. Secondaries-focused interval funds benefited from the supply environment.
The category has continued to grow through the cycle, including during periods when BDC fundraising slowed. Advisors comfortable with BDC exposure are increasingly adding interval fund exposure to broaden strategy access.
How interval funds and BDCs combine in portfolios
The structures are complementary more than competing:
- BDCs for direct exposure to middle-market lending at scale with higher leverage and yield
- Interval funds for strategy diversification beyond direct lending — secondaries, multi-strategy, real estate credit, specialty strategies
An advisor building semi-liquid private markets exposure typically uses both. The combination provides broader coverage than either wrapper alone.
The takeaway
Interval funds have quietly become the single most versatile wrapper for semi-liquid private markets exposure in the US market. They are less leveraged than BDCs, broader in strategy coverage, and increasingly available at scale from major managers. Advisors who understand both wrappers — and their complementary roles — are positioned to build more diversified and more durable private markets allocations than those who rely solely on the more visible BDC category. The next wave of evergreen product innovation will likely continue to favor the interval fund structure for its strategy flexibility.