What is the future of the private credit, and interval and tender offer funds housing these assets? Growth of both continues to accelerate: 2024 was a record year for interval fund and tender offer fund net flows, dominated by credit, which brought in nearly $21 billion. Given this growth today, where are the opportunities going forward?
To further public understanding of these market dynamics, XA Investments LLC held an at-capacity private markets education day at the New York Stock Exchange on June 23, 2025. It featured two panels composed of industry leaders who discussed market trends in both private credit and interval funds.
PRIVATE CREDIT MARKET TRENDS
The direct lending sub-category dominates private credit interval funds with 45.8% of assets, followed by multi-strategy credit at 33.4%; structured credit/loans at 11.3%, and asset-backed lending (ABL) at 9.5%. These sub-categories are growing across this board. ABL has experienced 25% AUM growth year-to-date. The first panel of the event provided an analysis of what lies behind these trends and what might be next. Panelists included Jared Baumann, Director at Cliffwater; Gary Gipkhin, Director at StepStone Group; and Kevin Prunty, Senior Managing Director at LongWater Opportunities. The panel was moderated by Kevin Davis, Head of Sales & Distribution at XA Investments.
Mr. Davis opened the panel by explaining the rapid growth in private credit: “Increased banking regulations and stricter capital requirements have resulted in traditional banks issuing fewer loans. Private lenders have stepped in to fill the void. Clients are searching for alternative sources of high yield and private credit is easy for clients and advisors to understand.”
What is further driving advisor demand is the desire for a scalable solution for alternatives, which these structures provide, said Jared Baumann, Director, Cliffwater, one of the panelists at the event. “Interval funds are largely point and click, unlike a drawdown fund.”
However, not all private credit strategies are the best fit for the interval structure, explained Gary Gipkhin, Director, StepStone Group, another panelist. In an interval fund, unlike a traditional drawdown fund, capital should be deployed shortly after receipt, to avoid cash drag, making it important to maintain a large pipeline of opportunities. “The strategies that fit best are flexible ones, grounded in direct lending, which continues to offer the most high-quality opportunities within private credit today due to its low volatility, strong downside protection and attractive risk-adjusted returns. In a dynamic and uncertain market environment, it’s important to maintain the flexibility to pivot into return-enhancing alternative credit strategies such as asset backed lending and private credit secondaries, to support deployment over the long term.”
Though the market is currently dominated by direct lending, panelists offered forecasts for growth in other areas of private credit: “Lower middle market direct lending is a white space in private credit,” said Kevin Prunty, Senior Managing Director, LongWater. “Asset-backed lending is another less-trafficked area that is starting to see traction.”
Gipkhin explained why demand is so strong for ABL: “It is a largely untapped market that I see as the ‘next big wave’ of opportunities. It can offer a yield premium above direct lending largely due to the reduced competition in the space and is less correlated to it.” He noted that many investors are already familiar with direct lending interval funds, making it easier for them to take the next step to allocate to interval funds that have substantial ABL exposure.
Launching a fund
Despite the rapid growth in private credit, launching a new fund is far from easy. Fund expenses are one barrier, and sufficient scale is therefore required. Prunty, referencing XA Investments’ research, noted $100 million was the minimum scale for a fund to become a springboard for future growth, whereas Baumann said that at Cliffwater, the launch AUM goal was $250 million.
For a new private credit fund to succeed, Baumann also pointed to the importance of building partnerships with RIAs rather than taking a transactional sale approach. Key to this was sharing research and knowledge with RIAs. For instance, Cliffwater distributes to RIAs a recent book on private debt by the firm’s CEO Stephen Nesbitt.
Kevin Prunty similarly pointed to the importance of advisor education, given that this is a relatively new market. “It requires transparency through consistent reporting and constant interaction, but you can build lasting relationships.” Gipkhin said that, given investor concerns his sales team is explicit about how these funds work, including their semi-liquid characteristics.
In terms of where these funds fit into a portfolio – a concern of advisors – panelists were in agreement that private markets can be used to complement public equity and fixed income allocations.
For a deeper dive on the challenges in launching an interval fund and how to overcome them, see XAI’s whitepaper “Clear-eyed approach critical to a successful launch.”
Risks
A concern raised by an audience member was about the valuation of private credit investments. The panelists noted that interval funds, as funds operating under the Investment Company Act of 1940, must comply with robust valuation oversight and an approved valuation procedure for private credit investments.
Another question regarding whether the asset class was becoming oversaturated was raised. This is not the case, according to the panelists, particularly given young investors’ demand for alts according to Bloomberg research, and a growing market demand for yield assets.
“The asset class isn’t going away,” said Kevin Prunty. “If the investment can be structured appropriately, there can be a place for these assets in a younger person’s retirement portfolio. They are designed to be a long-term asset.”
INTERVAL FUND MARKET TRENDS
Interval funds and tender offer funds are experiencing explosive growth. The event’s second panel analyzed this trend. New fund launches continue at a record pace, with 50 in 2024 and 32 so far in 2025. 55 interval and tender offer funds are expected to launch in the next six months based on SEC registrations. Net assets in these funds have also grown by 12.8% YTD. The second panelists analyzed and discussed these trends and more, with panelists including Brett Schlemovitz, Partner at StepStone Group; Matt Brennan, Managing Director at Cliffwater; and Ben McCulloch, General Counsel and Managing Director for XA Investments. The panel was moderated by Kim Flynn, President of XA Investments.
Ms. Flynn began the panel by walking the audience through a number of interval and tender offer fund market trends and statistics. She noted that the interval fund market has a compound 30% annual growth rate, with ample room for even more growth given the size of the RIA channel.
Given the compelling growth rates, Ms. Flynn asked the second panel to opine on other asset classes that are likely to experience growth.
Private credit is compelling for numerous reasons, said panelist Brett Schlemovitz, but private equity offered in the interval fund and tender offer fund format is also gaining interest from the RIA channel. “It can bring growth with less volatility and lower correlations versus public equity. And with fewer companies going public, you are missing segments of the market if you don’t have access to companies via private equity.”
Mr. Schlemovitz also pointed to opportunities in infrastructure. He noted it is comparatively easier for advisors to explain to their clients because it is tangible, and clients grasp the need for new infrastructure.
“[Educating advisors] is a longer-term project. Advisors know they should be in private markets, but they already have good businesses and learning about the private markets doesn’t have to be a job in and amongst itself,” he said. The potential for model portfolios that include interval funds could enhance the penetration of interval funds.
High-quality institutional investors are sensing an opportunity and are entering the market, as documented in XA Investments’ quarterly research reports. Mr. Brennan explained the reason why: “the wealth management appetite for these investments is growing,” he said.
Additionally, manager fees in the defined benefit and institutional space have compressed, said Mr. McCulloch. The retirement industry itself is shifting away from defined benefit plans. “Institutional asset managers have begun to feel they are missing out if they aren’t in these growing new channels (interval funds). With baby boomers in the process of retiring en masse and continued asset migration from defined benefit plans to self-directed retirement plans, there’s a larger demographic shift occurring in the asset management industry right now,” McCulloch said.
Which structure?
Interval fund or tender offer fund? Ms. Flynn queried the panel on their thoughts regarding fund structure. The panel explained what went into managers’ decisions about the choice of structure.
Liquidity is one determinant. “Tender offer funds can be a better fit for some asset classes from a manager’s perspective because they aren’t required by law to provide redemptions,” said Schlemovitz. However, it’s easier to buy an interval fund with a ticker, he noted. Mr. Brennan added, “it is important to match the structure to the liquidity requirements of the strategy.”
There are additional nuances at play. McCulloch said, “It is not just optionality around liquidity. Interval funds have to strike a NAV on a daily basis, while tender offer funds often don’t. Daily NAV can be very challenging for many managers and asset classes.”
The platform positioning of these structures is another overlooked factor that could drive manager choice. Mr. McCulloch noted that many platforms have started to coalesce around the idea that interval funds belong alongside mutual funds on platforms, whereas tender offer funds are often treated similarly to private funds. “A big consideration for managers deciding between the two structures is who are you going to sell to,” he said.
A NEW INDEX: INTVL
The rapid evolution of the interval fund and tender offer fund market includes the launch of the
new XAI Interval Fund IndexTM (“INTVL”), a first for the industry. This is a total return index tracking registered interval and tender offer funds with over $100 million assets and a ticker symbol for public net asset value dissemination. Currently the index has 77 constituents that meet certain criteria for inclusion. INTVL also includes index weight constraints. The index is rebalanced and reconstituted on a quarterly basis and is available on Bloomberg under the code INTVL.
Speaking at the educational event, Ms. Flynn noted that advisors and managers are turning to interval and tender offer funds more than ever before, and the index brings clarity to performance. She stated, “XA Investments created INTVL to be a market barometer for the interval fund marketplace and increase transparency. INTVL tracks the interval fund market leaders including Cliffwater, StepStone, Bluerock and others.”
As the day’s discussion and recent launch of the first-ever index show, the interval fund and tender offer fund market is maturing but not slowing down.
For additional resources from the two panels please see the links below:
