Mutual Funds’ Investments

What is an Interval Fund?

An interval fund is a type of investment fund that allows investors to buy and sell shares at specified intervals. Unlike open-ended mutual funds, where investors can redeem shares at any time, or closed-end funds, which are traded on stock exchanges, interval funds combine features of both.

How Interval Funds Operate

Interval funds operate with a unique structure:

1. Purchase and Redemption Periods: Investors can purchase shares of the fund at any time but can only redeem them during specific intervals, as determined by the fund's prospectus. These intervals can range from quarterly to annually.

Utility of Interval Funds

Interval funds are designed to meet specific investment needs that traditional funds may not fulfill. They are particularly useful due to its limited redemption options, these funds encourage investors to adopt a long-term perspective, which aligns with the nature of their underlying assets.

Benefits of Interval Funds

1. Professional Management: These funds are managed by experienced portfolio managers who have expertise in handling complex investment strategies.
2. Regulatory Oversight: As SEBI -regulated entities, interval funds provide transparency and protect investors through stringent compliance measures.
3. Regular Income: Many interval funds pay dividends or distribute income generated by their underlying investments.

Key Features of Interval Funds

1. Defined Redemption Periods: Shares can only be redeemed at set intervals, providing stability to the fund’s asset base.
2. Capped Redemptions: Redemption limits ensure that the fund retains enough capital to maintain its long-term investments.
3. Illiquidity Premium: Investors are compensated for limited liquidity through potentially higher returns.
4. Suitability for Sophisticated Investors: Due to the complexity and nature of investments, interval funds are often best suited for investors with a moderate to high risk tolerance.