Share Repurchase Programs

NAV calculation formula and components: Basic NAV = (Total Assets - Total Liabilities) ÷ Outstanding Shares. Asset categories: Cash and cash equivalents (money market funds, T-bills) marked to market daily. Publicly traded securities (stocks, bonds, listed derivatives) using closing prices on pricing date from primary exchange. Privately held securities (private loans, unlisted equity, real estate) using: Most recent third-party appraisal (updated quarterly/semi-annually), internal models (DCF, multiples, adjusted cost), manager estimates (for positions lacking external valuations or recent transactions). Liabilities: Accrued expenses (management fees, operating costs, professional fees through pricing date), borrowings (credit facility draws, margin loans if applicable), pending redemption obligations (prior-period repurchases not yet settled).

Pricing date timing and rationale: Standard: 2-5 business days after tender deadline (allows final portfolio pricing, accrual calculations, settlement preparation). Example timeline: Tender deadline Friday 4pm ET → Pricing date Tuesday (3 business days later) → Settlement following Friday (7 days post-pricing). Rationale for lag: Gather final market prices for liquid holdings (Friday close to Tuesday ensures weekend/holiday data incorporated), obtain updated valuations for illiquid assets (managers finalize appraisals, confirm model inputs), calculate expense accruals (pro-rate operating expenses through pricing date), process and verify tender requests (confirm submission validity, calculate proration if needed). Trade-off: Longer lag provides more accurate NAV (complete data) but creates uncertainty for tendering shareholders (3-7 day market movement between tender decision and pricing).

Multiple share class NAV calculations: Funds with Class A (retail), Class C (retail no-load), Class I (institutional) calculate separate NAVs per class reflecting different fee structures: Class A NAV: Portfolio value × Class A allocation - Class A specific expenses (12b-1 fees 0.25%, shareholder servicing) ÷ Class A shares. Class I NAV: Same portfolio allocation - lower expenses (no 12b-1 fees, lower admin costs) ÷ Class I shares. Result: Class I NAV typically 0.25-0.50% higher than Class A annually (compounding over time), reflects lower expense burden. Each class tenders at its own NAV (Class A repurchased at Class A NAV, Class I at Class I NAV).

Standard proration formula: Acceptance Rate = Repurchase Offer % ÷ Total Tender Requests %. Example calculations: Scenario 1 (moderate oversubscription): Fund offers 5% repurchase, receives 7.5% tender requests. Acceptance rate = 5% ÷ 7.5% = 66.67%. Investor tendering $15K receives $10K (66.67% × $15K). Scenario 2 (severe oversubscription): Fund offers 5% repurchase, receives 15% requests (3x offer). Acceptance rate = 5% ÷ 15% = 33.33%. Investor tendering $30K receives $10K (one-third accepted). Scenario 3 (undersubscription): Fund offers 5%, receives 3% requests. Acceptance rate = 100% (all requests accepted in full, offer not binding).

Minimum tender and remainder handling: Typical minimum: $1,000-$5,000 per tender request (prevents processing small redemptions with disproportionate costs). Proration interaction: Investor requesting $10K tender at 25% proration receives $2.5K. If minimum is $5K, request typically rejected ($2.5K acceptance below minimum threshold), investor must either: Wait for higher acceptance rate period, increase tender amount to ensure post-proration exceeds minimum (tender $20K+ to receive $5K+ after 25% proration), tender full position eliminating remainder. Fractional shares: Most funds accept fractional share tenders ensuring exact proration. Example: Investor with 1,234.56 shares requests full position tender, 50% proration accepts exactly 617.28 shares (not rounded to 617), provides precise fulfillment. Some funds round to nearest whole share (617.28 becomes 617 shares, 0.28 share remains invested), disclosed in prospectus.

Share class proration independence: Multi-class funds prorate separately by class to prevent cross-subsidization: Class A: Offers 5% of Class A shares, receives 10% Class A requests, prorates at 50%. Class A investors receive 50% fulfillment. Class I: Offers 5% of Class I shares, receives 6% Class I requests, prorates at 83.33%. Class I investors receive 83.33% fulfillment. No pooling—Class A cannot access unused Class I capacity and vice versa. Exception: Single-gate funds pool all classes under one offer with aggregate proration (disclosed in prospectus), creates single acceptance rate across all share classes. Less common (15-20% of multi-class funds).

Cash reserve management: Pre-tender cash buildup: Funds increase cash positions 2-4 weeks before tender (typically raising from 2-3% normal to 5-8% pre-tender), sell most liquid positions first (government bonds, large-cap stocks, broadly syndicated loans), accelerate distributions from portfolio investments where possible (requesting scheduled interest/dividend payments early). Post-tender adjustment: If redemptions exceed expectations, fund may sell additional positions after pricing date to replenish cash reserves (avoiding forced sales pre-tender at compressed valuations), defer new investments 1-2 quarters until cash rebuilt (opportunity cost of uninvested capital).

Credit facility utilization: Revolving credit lines: Most interval funds maintain $10M-$100M+ lines of credit from banks for temporary liquidity. Terms: Interest at SOFR + 150-300 bps (6-9% all-in currently), commitment fees 0.25-0.50% on unused capacity, typically 1-2 year facilities with annual renewal. Usage pattern: Draw during tender settlement (covering redemptions while awaiting portfolio sales), repay within 30-90 days from asset sales or new subscriptions. Strategic benefit: Avoids forced selling at unfavorable times (draw facility, sell assets over 4-8 weeks at better prices, repay facility). Cost: $1M-$2M annually in fees and interest for $100M facility (modest 0.10-0.20% drag on fund returns).

Portfolio liquidation priorities: Liquidity cascade: funds sell in order of increasing market impact: Tier 1—Cash equivalents and treasuries (zero market impact, immediate settlement). Tier 2—Publicly traded investment-grade bonds and large-cap stocks (minimal impact 0.10-0.25%, 1-3 day settlement). Tier 3—Below-investment-grade bonds and small-cap stocks (moderate impact 0.50-1.00%, 3-5 day settlement). Tier 4—Private loans with recent BWIC activity (market impact 2-5%, 10-15 day settlement via broker). Tier 5—Private equity, real estate, venture positions (high impact 10-30%, 30-90+ day negotiated sales, avoided unless extreme stress). Preservation principle: Minimize impact on remaining shareholders by selling most liquid positions first (exhausting Tier 1-2 before touching Tier 3-4), avoid distressed sales of illiquid positions except in liquidation scenarios (complete fund shutdown).

SEC equal treatment requirements: Rule 23c-3 mandates: Same price (NAV) for all tendering shareholders on pricing date, same proration percentage across all tendering shareholders within each share class, no preferences based on: Shareholder size (institutions vs retail), Timing (early vs late submissions during window), Affiliation (fund managers, directors, employees vs unaffiliated), Historical loyalty (long-term holders vs recent purchasers). Violation consequences: SEC enforcement action (cease-and-desist orders, fines), investor lawsuits (shareholders claiming unequal treatment), potential criminal referral (if willful fraud in pricing or allocation).

Board oversight and approval process: Pre-tender board review: Valuation committee meets 1-2 weeks before tender deadline reviewing: Updated portfolio valuations (third-party appraisals, manager estimates, model assumptions), NAV calculation methodology (consistent with prior periods, any changes justified), liquidity plan (cash available, positions to sell if oversubscribed, facility capacity). Post-tender board review: Board or valuation committee reviews tender results within 5-7 days: Total requests received (percentage of outstanding shares, dollars requested), proration calculation if applicable (verification of arithmetic accuracy, equal treatment confirmation), settlement process (payment timing, any shareholder disputes). Documentation: Board minutes record approval of NAV methodology, tender acceptance terms, and any exceptions or special considerations (hardship redemptions, dispute resolutions).

Shareholder dispute resolution: Common disputes: Timing disputes (shareholder claims request submitted before deadline but fund records show late receipt), pricing disputes (shareholder believes NAV understated, requests adjustment), proration disputes (shareholder believes calculation error, not receiving proper allocation), minimum tender disputes (request rejected as below minimum, shareholder argues proration caused shortfall). Resolution process: Fund reviews documentation (submission timestamps, NAV workpapers, proration calculations), board or committee investigates if merits exist, fund responds to shareholder in writing (typically 15-30 days), escalation to ombudsman or arbitration if unresolved. Most disputes (>90%) resolved in fund's favor—shareholder burden proving procedural error or unfair treatment, well-documented funds prevail in vast majority of cases.