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.