A liquidity promise that binds one day a quarter

A FEDS Note by Logan George and Chaehee Shin examines the vehicles carrying retail money into private markets: funds that invest in illiquid assets while offering investors periodic, albeit constrained, redemption. Total net assets across the three main types rose from 15 billion dollars in 2018 to 388 billion in 2025. Over the same period total mutual fund net assets grew by 33 percent.

The three types are interval funds, tender offer funds and non-traded perpetual-life business development companies. All three are closed-end structures, and that is the point: none is bound by the 15 percent illiquid asset cap that restricts traditional open-end mutual funds, which enables much higher exposure to private credit, private equity, real estate and hedge fund strategies. Assets under management for non-traded BDCs were approximately 307 billion dollars as of the fourth quarter of 2025.

The differences lie in how liquidity is governed, and they are material. Interval funds provide structured, pre-committed liquidity by mandating share repurchases at set periods, mostly quarterly. Tender offer funds typically offer similar quarterly repurchases, but their boards retain full discretion over the timing, frequency and size of those offers. Non-traded BDCs sit between the two: many offer quarterly repurchases, but typically capped at around 5 percent of net asset value per quarter, and the programmes may be curtailed.

One detail deserves to be read slowly. Only interval funds are subject to a liquidity mandate tied to repurchase offers, and they are required to maintain full liquidity only for the amount offered during that specific repurchase period, with no such requirement at any other time. The authors also record that private credit exposure in interval funds has been expanding significantly.

Access differs as much as liquidity does. Interval funds are the most broadly available, with relatively low minimums and a presence on many retail brokerage platforms. Tender offer funds and non-traded BDCs are typically distributed only through private wealth channels, generally limited to accredited investors or qualified clients, though some BDCs offer retail share classes with relatively low minimum investments.