The real-time transfer agency approach for supporting interval funds

As interval funds have grown in popularity, investment firms need to balance investor needs with system and servicing capabilities. The desire to offer an attractive strategy that investors are seeking can often run counter to the need for transfer agency systems that can flex to handle the nuances of this fund type, which follows its own calendar.

What is an interval fund?

Interval funds allow the asset manager to set redemption parameters to a particular date and redemption cap, which restricts liquidity and gives the manager greater control. What makes interval funds attractive to investors is exposure to strategies they may otherwise not have access to with the added benefit of simplified tax reporting as opposed to their private fund counterparts.

Now, interval funds may be a smart strategy for both managers and investors, but can the systems and service providers in the background handle this strategy? Most transfer agency systems are geared toward striking a price every day, with little ability to customize a calendar to a unique, interval-style schedule.

For instance, if you have a system that was built to handle daily pricing and processing only, managing an interval fund to a quarterly redemption schedule will be a challenge. Without a flexible system in place, you may be forced to estimate – rather than know for sure – where the numbers are when redemption time comes around, and trades may kick back if the estimates are inaccurate.

With a real-time system that offers built-in flexibility to customize to a unique calendar, you can see at any time during the redemption period whether you are oversubscribed or within your cap. With this system, supported by an expert team running the technology on your behalf, you can essentially collect the requested transactions, validate them in the moment and then simply wait for the interval end date to get the price and process in real time.

Another benefit to a real-time transfer agency system and flexible services is accurate reporting to investors. With real-time reporting capabilities, you can give your investors a more accurate view of what is happening in the fund while you are gathering redemption requests.

Ultimately, if you are using a batch-processing transfer agency approach to service interval funds, it will be challenging – and potentially beset with inaccuracy.

Fortunately, you don’t need to use a traditional system or service provider to support a non-traditional fund type.

FIS Transfer Agency provides real-time technology and a dedicated team of experts that can align to both standard and nonstandard funds so that managers and investors can get the most out of the strategies they pursue.

Contact our Transfer Agency team to set up a virtual meeting.

Editorial Note: This article was originally published in August 2020. It has been updated for accuracy and comprehensiveness.