For the past several years, we have seen increasing interest in public, nontraded BDCs among our clients who offer interval funds or tender-offer funds. Both interval and tender-offer funds have created appetite among retail investors and their advisors for semi-liquid strategies.
Differences relevant to transfer agents
From a transfer-agent perspective, public (registered), nontraded BDCs are similar to tender-offer funds. Both vehicles offer periodic entry and, typically, quarterly liquidity.
Our partners at FUSE Research Network have also observed strong growth in the BDC market. For the second quarter of 2025, FUSE’s data showed that net assets in the BDC market of $188 billion, of which public BDCs represented the majority. Most of these assets are in perpetual offerings.
Differences relevant to asset managers
From an investor and asset-manager perspective, one of the big differences between BDCs and tender-offer (and other registered) funds is the level of leverage allowed. Also, for the second quarter of 2025, FUSE reported total BDC assets of $342 billion—approximately 82% higher than net assets. This is consistent with regulations that allow BDCs to borrow up to $2 for every $1 of equity. By contrast, tender offer funds are limited to borrowing $0.50 for every $1 of equity.
Another significant difference in these strategies is the nature of the underlying assets. BDCs must invest primarily in private U.S. companies or small public companies. These rules are a natural fit for strong investor interest in private credit (though equity investments are also possible). Tender-offer funds have much more investment flexibility—though they, too, have benefited from strong demand for private-credit strategies.
BDCs versus tender-offer funds
For clients and other industry participants interested in exploring BDCs, we’ve summarized some key points of comparison to tender-offer funds in the following table.
| Feature | Public, Nontraded BDCs | Tender offer funds |
|---|---|---|
| Registration | SEC | SEC |
| Share offerings | Continuous | Continuous |
| NAV Calculation frequency | At least quarterly (typically monthly in connection with repurchase offers and subscriptions) | Monthly or quarterly (frequency set by board) |
| Purchase frequency | Monthly or quarterly depending on NAV frequency | Monthly or quarterly depending on NAV frequency |
| Liquidity/ Redemption |
Periodic (typically quarterly) share repurchase offers, up to 5% of NAV per period | Periodic tender offers at board discretion (typically quarterly) disclosed in offering documents |
| Repurchase certainty | Required repurchases per offering documents (e.g., up to 5% NAV quarterly) | No guarantee—repurchases occur only if and when the board authorizes a tender offer |
| Leverage | Permitted up to 2:1 debt-to-equity (150% asset coverage) with SEC approval | Limited to 33% leverage (300% asset coverage) |
| Tax reporting | 1099, given election of regulated investment company (RIC) status | 1099, given election of regulated investment company (RIC) status |
| Reporting/ Disclosure |
Corporate-style SEC filings: Forms 10-K, 10-Q, 8-K (like operating companies) | Standard closed-end fund reporting framework: N-CEN, CSR, N-PORT and other related filings. |
Take care with tender process dates
In our experience, funds can run into operational stress when there’s too little time between the tender expiration data and the tender process date. In these instances, there’s another useful comparison to tender-offer funds:
Tender offer process dates
With tender-offer funds, the month-end (and therefore quarter-end) process includes striking a net asset value (NAV). Generally, funds build in several days for this process. This gap between the tender expiration date and striking a NAV creates time for the fund operations team to ensure the tender offers are received and accounted for prior to processing.
BDC process dates
With BDCs, by contrast, the NAV may already be known. In striving to serve investors well, funds might be tempted to set a tender process date immediately following the tender expiration date. In this case, the operations team has little or no time to handle not-in-good-order (NIGO) tender submissions—which ultimately leads to challenges for investors.
We recommend a minimum of five business days between the tender expiration date and the tender process date. This is one small example of how funds and administrators can work together to ensure investors are served swiftly and well.
Learn more about UMB Fund Services and how we can support your firm’s registered and alternative investment fund servicing needs, or contact us to be connected with a fund services team member.
