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Overcoming the Interval Fund "Valley of Death" -

Overcoming the Interval Fund “Valley of Death”

Sponsored Content by Ultimus Fund Solutions

Over the past five years, the interval fund market has experienced explosive growth, as the structure has attracted both managers and investors by expanding access to illiquid alternative investments in a registered fund structure. While many managers are eager to launch an interval fund, the process can be more difficult than one might expect. Managers need to understand and prepare for a variety of challenges in order to be successful.

For example, the registration of an interval fund is not its starting point; the practical launch is when it reaches $100 million in AUM. This phase can be thought of as the interval fund “valley of death,” a term borrowed from the technology industry that refers to the gap between a brilliant idea and its successful commercialization. Reaching $100 million in AUM is important for a variety of reasons: Below the $100 million mark, the fund will find itself eating its management fees as managers waive fees to keep expense ratios in line. It may also be difficult to get a smaller fund onto a custody platform.

Life of an Interval Fund

Managers should not be deterred from launching an interval fund, but they should develop a plan to cross the “valley of death.” Seeding the new interval fund with contributed capital or converting a private fund can be incredibly helpful. There are a few structural features that may make certain funds more attractive as well, including providing daily NAV/electronic ticketing and not charging performance fees. Additionally, fund sponsors should aim to target advisors who are already interval fund buyers through advisor communities like ADISA, AICA, Blue Vault and IPA.

For more information on best practices to overcome the “valley of death,” read XAI’s new white paper written in collaboration with our thought partner, Ultimus Fund Solutions, here.


Ultimus Fund Solutions in an independent fund administrator offering full-service fund administration, fund accounting, transfer agent and investor servicing solutions and support for registered funds, including interval funds. For more information about Ultimus please visit https://www.ultimusfundsolutions.com/

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