Market
Memos from Howard Marks: Ruminating on Asset AllocationInterval Funds
Balancing long-term investments with periodic liquidity
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An Overview
In return for limited liquidity, interval funds can offer the potential for a greater return
These closed-end funds do not trade on exchanges but allow shareholders to buy shares at regular intervals and make periodic offers to repurchase shares at their net asset value (NAV).
This semi-liquid structure is designed to encourage long-term investing by allowing investment managers to allocate to less liquid instruments, such as loans, structured products and illiquid private debt.
Features
Interval funds have the following features and potential benefits:
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Daily valuation
NAV priced daily but not listed on an exchange
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Periodic liquidity
Investors may sell shares back to the fund at NAV periodically
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Investment transparency
Regular regulatory filings provide details on portfolio holdings
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Simplified tax reporting
Shareholder distributions reported annually on Form 1099