Traditional and alternative asset managers were busy in 2024, with over 50 new interval funds and tender offer funds becoming effective during the year with another 50+ in the pipeline, according to analysis from consulting firm XA Investments.
Interval funds and tender-offer funds are two of the evergreen fund strategies that have taken off in recent years within the wealth channel. (Non-traded REITs and business development companies are the other two structures.) The primary difference between interval funds and tender-offer funds is their liquidity mechanisms. Interval funds have defined liquidity caps and periods—commonly 5% per quarter—while tender-offer funds are required to make periodic tender offers on a discretionary basis as determined by the fund managers.
According to XA, the two structures saw a 21% increase in the number of funds and a 35% increase in managed assets during 2024. Overall, the firm said there are now 257 total funds (124 interval funds and 133 tender offer funds) with a combined $172 billion in assets, with about 60% of assets in interval funds.
The pipeline of new products shows no signs of slowing. Overall, asset managers registered 45 new funds in 2023 and 80 in 2024, according to XA Investments President Kimberly Flynn. That’s created a backlog for fund approval, with it taking, on average, about seven months for a fund to come to market once it’s been filed with the SEC. Activity is coming both from new entrants and managers adding a second or third strategy. According to Flynn, 44 of the 146 managers that have developed interval or tender offer funds now have two or more funds in the market.
Overall, XA projects that total assets in interval and tender offer funds could reach nearly $350 billion by the end of 2027.
Some players have significant AUMs. For example, Cliffwater operates the single largest interval fund (with $23.8 billion in net assets), while Partners Group has the largest tender offer fund ($15.6 billion in net assets). But overall, Flynn said many managers are gaining traction.
“The leaders haven’t pulled away,” she said. “Partly because firms are raising capital multi-channel—through RIAs, family offices, IBDs, wirehouses, etc. A lot of firms have different success strategies by focusing on certain channels.”
For example, Cliffwater has focused exclusively on RIAs, while Partners Group’s product is one of a handful of funds available across all four wirehouses: Merrill Lynch, Morgan Stanley, UBS and Wells Fargo.
Another aspect that’s led to the adoption of interval funds is that investors have access to I-class shares rather than a brokerage class with an additional fee. “That explains why the interval fund market very much was focused on RIAs and family offices from the start,” Flynn said.
In fact, Flynn said there’s been a notable shift in that initially, advisors had to be sold on evergreen strategies, but now they are demanding them.
“It’s gone from a push to a pull dimension,” she said. “Now it’s advisors saying, ‘You have to make my life easier.’ That’s motivated a lot of naysayers. It’s daunting to launch registered funds, but it’s helpful if you have clients saying they would prefer them. And that’s a new element I’m hearing.”
Regarding asset types, private credit remains the most popular for interval funds and private equity for tender offer funds, but managers are experimenting with other assets. Some managers have debuted infrastructure-based interval funds. One, in particular, Flynn has her eye on is Coatue, an alternative asset manager focused on technology and innovation and is now entering the evergreen space with a tech-centric fund.
