Tender Offer Fund
Definition
A tender offer fund is a closed-end fund registered under the Investment Company Act of 1940 whose shares are not listed on an exchange and whose only regular liquidity is a series of tender offers the fund makes to buy back its own shares at net asset value. Each offer is a decision of the board, made under Rule 13e-4 of the Securities Exchange Act, and is typically for up to 5 percent of the fund's net assets once a quarter; the fund may make a smaller offer, or none, in any quarter. This is the structural difference from an interval fund, which adopts repurchases as a fundamental policy under Rule 23c-3 and must offer at least 5 percent of its shares on schedule. Most evergreen private equity, private credit and real assets funds sold to individual investors through wealth platforms are tender offer funds, because the structure can be limited to qualified clients and can therefore charge a performance fee, can hold fully illiquid assets without a liquidity reserve, and can strike NAV monthly or quarterly rather than daily. Investors receive a 1099, not a K-1, and the fund reports to the SEC on Forms N-CSR and N-PORT like any registered fund.
Why it matters
The evergreen private markets funds that wealth platforms now sell to individuals as the modern alternative to a drawdown fund are, for the most part, tender offer funds, and the word quarterly in their marketing describes an intention rather than an obligation. The structure was chosen by the managers for good reasons: it permits a performance fee, full investment in illiquid assets and infrequent valuation. Every one of those features is also a reason the fund may not buy shares back when investors most want to sell. The Schedule TO record shows what a fund has actually done: whether it has offered 5 percent every quarter, whether tenders have been prorated, and whether the offer has ever been reduced. That record, read against the fund's illiquid asset share and its subscription trend, is a better guide to the liquidity an investor will get than the prospectus sentence that says the fund intends to offer 5 percent.
Common misconceptions
- •Quarterly liquidity is not a right. The fund intends to offer it; the board decides each quarter; the prospectus says the shares should be considered illiquid.
- •A tender offer fund is not a private fund. It is registered under the 1940 Act, has independent directors, files audited reports and issues a 1099. What is private is often only the distribution channel.
- •A 5 percent offer is not 5 percent for each investor. It is 5 percent of the fund; if 12 percent of shares are tendered, each investor sells about 42 percent of what they submitted.
- •The tender price is not known when you tender. It is the NAV on a valuation date after the offer closes, and the fund may deduct an early repurchase fee.
Technical details
How a tender offer runs
Board authorization: the board approves an offer for a stated amount, expressed as a percentage of net assets or a number of shares, usually early in the quarter.
Schedule TO: the fund files the offer to purchase with the SEC; the offer must stay open at least 20 business days under Rule 13e-4 and treats all shareholders equally.
Tender period: investors submit some or all of their shares; tenders can be withdrawn until expiry.
Valuation date: NAV is struck on a date after expiry, typically the last day of the quarter; that NAV is the price.
Proration: if tenders exceed the offer, the fund buys the same fraction of each investor's tender; odd-lot preferences are rare in fund tenders.
Payment: cash, or occasionally a note, paid on the schedule the offer document sets, in practice weeks after the valuation date; an early repurchase fee, commonly 2 percent within one year, is deducted first.
Results: an amendment to the Schedule TO reports shares tendered, shares accepted and the proration factor.
Tender offer fund versus interval fund
Legal basis: Rule 13e-4 tender offers at board discretion, versus Rule 23c-3 repurchase offers adopted as a fundamental policy.
Obligation: none, versus a mandatory offer every 3, 6 or 12 months.
Size: whatever the board sets, typically up to 5 percent of net assets, versus 5 to 25 percent of outstanding shares.
Liquidity reserve: none required, versus liquid assets equal to the offer amount from notice to pricing date.
NAV frequency: monthly or quarterly is common, versus at least weekly and daily in the five business days before a repurchase deadline.
Performance fee: available when investors are qualified clients, versus generally unavailable to a fund sold to the public.
Investor eligibility: often accredited or qualified client, versus usually open to all.
Shared: 1940 Act registration, independent board, 300 percent asset coverage for borrowing, RIC taxation and a 1099, N-CSR and N-PORT reporting.
Where the structure shows up
Evergreen private equity and secondaries funds from the large alternatives managers, sold through wirehouses and RIA platforms with $25,000 to $100,000 minimums.
Private credit and multi-strategy credit funds that hold direct loans valued quarterly.
Pre-IPO and venture vehicles; Fundrise's Innovation Fund ran as a tender offer fund before listing on the NYSE as VCX in 2026, the conversion route a tender offer fund can take when it wants exchange liquidity.
Fund-of-funds feeders into institutional drawdown funds, where the tender offer fund's own liquidity depends on distributions from funds it cannot redeem.
AltStreet's Fundrise review covers the contrast within one sponsor: its Income Real Estate Fund is an interval fund that has offered the 5 percent Rule 23c-3 minimum each quarter, while its Innovation Fund used the tender offer structure until listing.
Reading the offering documents
Repurchase language: intends to, expects to, or may, and whether any quarter has been skipped or reduced; the Schedule TO history answers the second part.
Early repurchase fee: rate, holding period and who receives it (the fund is standard; the manager is a red flag).
Valuation: NAV frequency, who values the private holdings, whether an independent valuation agent is used and how often, and the share of Level 3 assets.
Fees: management fee on gross or net assets, incentive fee and hurdle, the qualified-client condition that permits it, and the total expense ratio in the N-2 fee table including acquired fund fees for fund-of-funds.
Leverage: credit facility size and the asset coverage ratio at the last report; a fund that borrows to meet tenders is spending future liquidity.
Subscription trend: a fund whose inflows fund its tenders has liquidity until inflows stop; the semiannual report shows both sides.
Worked example: a prorated tender
Fund with $2.0 billion of net assets makes a quarterly offer for 5 percent, $100 million.
Investors tender $180 million; the proration factor is 100 / 180 = 55.6 percent.
An investor who tendered $50,000 sells $27,800 at the quarter-end NAV; the remaining $22,200 stays invested and must be tendered again next quarter, where the queue may be longer.
If the same investor bought within the last year, a 2 percent early repurchase fee reduces proceeds to $27,244; the $556 stays in the fund for the benefit of remaining holders.
Two consecutive prorated quarters at this level would leave an investor who wanted to exit fully after two quarters with about 80 percent of the position still held; the board can also reduce the next offer.
Frequently asked questions
- What is a tender offer fund?
- An unlisted registered closed-end fund that buys back shares from investors through periodic tender offers instead of daily redemptions or a fixed repurchase policy. The board decides each quarter whether to make an offer and for how much, commonly up to 5 percent of net assets, at the NAV on a stated valuation date. Investors who want out submit their shares; if more are submitted than the fund will buy, everyone is cut back pro rata.
- How is a tender offer fund different from an interval fund?
- An interval fund must make repurchase offers on a fixed schedule as a fundamental policy that only a shareholder vote can change, for 5 to 25 percent of outstanding shares, and must hold liquid assets to cover each offer. A tender offer fund makes offers at the board's discretion under Rule 13e-4 with no minimum, no fixed schedule and no liquidity reserve requirement. In practice both typically offer 5 percent a quarter; the difference is what happens when the manager would rather not.
- Why do private markets funds use the tender offer structure?
- Three reasons. A fund sold only to qualified clients (roughly $2.2 million net worth or $1.1 million with the adviser) may charge a performance fee, which an interval fund open to the public generally cannot; a fund with no fixed repurchase obligation can be fully invested in illiquid private assets without a liquidity sleeve; and a fund that strikes NAV monthly or quarterly can hold assets that are only valued that often. Evergreen private equity, secondaries and private credit vehicles from the large alternatives managers are mostly tender offer funds for those reasons.
- Can a tender offer fund refuse to buy back shares?
- Yes. Each offer is discretionary. The prospectus typically says the fund intends or expects to offer to repurchase up to 5 percent of net assets each quarter, that the board may reduce, delay or cancel an offer, and that investors should consider the shares illiquid. Funds have skipped or reduced offers when redemption requests were high or assets were hard to sell; the recourse for an investor is none, because no offer was owed.
- How is the tender price set?
- At the fund's NAV per share as of a valuation date stated in the offer document, usually the last business day of the quarter, which is after the offer expires. Investors tender without knowing the exact price. Many funds deduct an early repurchase fee, typically 2 percent, from shares held less than one year, paid to the fund rather than the manager.
- Who can invest in a tender offer fund?
- It depends on the fund. Some are registered offerings open to anyone with minimums of $1,000 to $25,000. Many are limited to accredited investors or qualified clients, either because the fund charges a performance fee or because it is sold as a private placement under Regulation D, and carry minimums of $25,000 to $100,000 with monthly or quarterly subscriptions.
- What does a tender offer fund file with the SEC?
- Form N-2 to register, annual and semiannual shareholder reports on Form N-CSR with audited financial statements, monthly portfolio holdings on Form N-PORT, and for each tender offer a Schedule TO with the offer to purchase, plus an amendment reporting the results. The Schedule TO filings are the record of every offer the fund has made, how many shares were tendered and whether they were prorated.