- Limited liquidity for shareholders is one of the key features of interval and tender-offer funds. Interval funds typically allow quarterly tender offers for 5%-25% of the fund’s net assets but may also provide monthly, semi-annual, or annual options. Since shareholders do not have a redemption right, tender-offer funds are less liquid, usually offering quarterly tenders for up to 5% of assets. If redemption requests exceed the tender limit, the fund may either extend the repurchase amount (gate extension) or fulfill requests pro rata.
- In the past five years, only 12% of private credit interval and tender-offer funds had a prorated tender offer. Pro rata fulfillment is more common in tender-offer funds (21.1%) than interval funds (9.9%) due to higher illiquidity and smaller tenders.
- To avoid pro rata fulfillment, funds often increase the tender amounts in quarters where redemption demand is expected to be high, a method more typical of interval funds. Many funds also extend redemption gates by up to 2%. Over the past five years, 13% of funds have used gate extensions to prevent pro rata fulfillment.
