Interval Funds

May 14. 15:48

Interval Fund Essentials: Key Forms


When researching an interval fund, you may find yourself surrounded by confusing and official-looking documents. Don’t worry; for the majority of investors, most of these forms don’t matter. But some of them do.

Whenever an investment company incorporates, buys securities, holds a vote, or does essentially anything else, it must file a form with the U.S. Securities and Exchange Commission (SEC). The SEC, which was created in the wake of the Great Depression to protect investors and banks from market manipulation, is the regulatory agency in charge of keeping an eye on the American financial system. It requires periodic and detailed documentation of the actions and holdings of funds, and it stores these filings in the EDGAR database.

Most of the information in these documents is redundant and, again, not particularly useful to investors. However, some contain important details about a fund’s goals, operations, and management. Here’s a list of the most important forms you might run across, and key things to look out for.


(found in forms N-2, 486BPOS, or 497)

If you’re going to read one document, it should be the prospectus. The prospectus contains the fund’s core details stated in plain English, organized in an understandable and mercifully brief way. It’s always included in the N-2 form, alongside the statement of additional information (which we cover below).

Within the prospectus, you’ll find several different subheadings giving high-level overviews of the fund’s essentials. Here are some examples and questions those sections might help answer:

· Investment advisor: Who’s in charge of allocating the money in the fund?

· Investment objective: Does the fund want to provide income for investors? Long-term growth? Both?

· Investment strategies: How is the manager going to set about achieving the objective? What kind of investments, and under what circumstances?

· Shares offered: What securities is the fund offering to investors, and how do they differ from each other?

· Fund expenses: What fees does the fund charge, and for what services? These usually differ by class of security.

· Risks: What are the risks inherent to the fund and its investments? How do those match your personal appetite for risk?


(Found in forms N-CSR & N-CSRS)

Every six months, an interval fund will file either its annual or semiannual shareholder reports. These are presented in the N-CSR and N-CSRS forms, respectively, and they detail the fund’s financial movements over the past two quarters. Although numerically dense, they can provide useful insight into the fund’s performance. Here’s what to look for:

· Shareholder letter: This will give a top-level overview of how the fund performed, with a heavy amount of positive spin. It’s useful to skim before digging into the useful data.

· Performance: How did each of the fund’s share classes perform? How does this compare to expectations, and to the market as a whole?

· Consolidated statement of cash flows: This gives an accurate idea of the actual inflow and outflow of cash from the fund. It’s an effective way to cut through the creative accounting that might be occurring on the fund’s balance sheet.

· Consolidated financial highlights: This gives a summary of the turnover, fees, and value of the fund’s underlying assets which can be useful when comparing to other funds.


(found in forms N-2, 486BPOS, or 497)

The fund’s statement of additional information, which can constitute either a “Part B” to the fund’s prospectus or a standalone form, is an elaboration on the themes previewed in the prospectus. The SAI provides a more granular look into topics like the fund’s investment strategy, the exact details of its repurchase offering schedule, and profiles of the fund’s officers and directors. Although the fund doesn’t need to file SAIs at a specific time, it must provide them for shareholders who submit requests. If -- after reading the prospectus -- you still have questions about the workings of an interval fund, the statement of additional information is your next stop.

Next: Interval Fund Essentials: Taxes 

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