Over the past year, elevated repurchase activity in private-credit interval funds and nontraded business development companies (BDCs) has prompted headlines about semi-liquid structures. Those headlines tell one part of the story. The product-development activity we’re seeing points to the next chapter.

At UMB Fund Services, we currently service 34 funds on our registered fund solutions platform, with another five in registration or drafting. From that vantage — and from conversations with managers, counsel, and industry partners — five product-development trends stand out for the year ahead.

1. The wrappers are changing

Roughly two-thirds of interval-fund assets still sit in private credit, but the majority of distinct interval-fund wrapper strategies coming to market today are outside it. That may sound like a story about strategy diversification (and it is, partly) but the more accurate read is that the strategies aren’t new to the market. They’re moving wrappers. Private equity and real assets, two of the biggest categories that have historically lived in the tender-offer space, are increasingly being launched as interval funds.

A lot of that is about distribution. It appears to be easier to sell product in the interval-fund wrapper because of National Securities Clearing Corporation (NSCC) trading. So managers running strategies that have worked in one wrapper are looking hard at whether they can deliver them in the other.

The hard part of this change is the valuation. Transitioning to a daily valuation cadence really switches things up. Managers are used to receiving statements from their underlying investments, taking their time, signing off on net asset values (NAVs), and going through review. Now, those managers have to adjust to a world where at 3:00 p.m. Central every business day, the day is over and the work has to be done.

Reconciling the demands of daily valuation with wanting to do it prudently—and making sure things are done right—takes real work in the formation stage to develop the models and procedures.

It doesn’t usually slow launch timing, but it is a meaningful mind shift. I expect we’ll see plenty of evolution on this front over the next year or two, as more managers move through more cycles, more audits, and more scrutiny of how their strategies are working inside the new wrapper.

2. Regulatory modernization is changing the possibility set

The SEC’s clear willingness to revisit how rules apply, while continuing to preserve investor protections, is introducing product designs that wouldn’t have been viable a few years ago.

The most visible example is access through retirement plans. Some historical constraints have been informally eased, though core 401(k) menu access for private credit or private equity funds remains a longer-term question. The more plausible near-term path is exposure through a target-date fund, such as a collective investment trust (CIT) or mutual fund, that allocates a portion of its assets to an interval fund.

Either way, the conversations we’re having with managers right now about liquidity features, operational scalability, and fair valuation of Level 3 assets are the same conversations that will determine which products are viable in a retirement-channel future.

3. Proration is part of the basic mechanics

During a UMB Fund Services webinar, panelist Josh Deringer of Faegre Drinker made a point worth repeating, “Proration isn’t a defect in interval funds or tender-offer funds. Instead, proration is how a fund holding less-liquid assets can offer periodic liquidity at all.” People wouldn’t be able to invest in these strategies in this kind of wrapper if the limited-liquidity feature wasn’t there.

What we’ve seen over the past six months is the first real stress test of these vehicles at scale and the structures are behaving the way they’re designed. That said, we may see further disclosure refinement and regulatory fine-tuning to help ensure investors and their advisors truly understand the liquidity features of products they purchase.

The other aspect of proration that can be lost in conversation is the operational one. When a fund enters proration, the dollar amounts and the caps make the headlines, but the transfer agency is processing thousands of transactions in a very short window.

For example, on one heavy proration day, our team might process far g. That does not happen smoothly without a transfer agency partner that’s set up and ready, with processes and procedures to support these kinds of funds. These logistics are something fund managers need to factor in early if they are considering launching into the space.

4. From single strategies to product suites

The historical pattern was one fund per manager who would bring an idea, launch it, and see how it does. What we’re seeing now is different. Managers who entered the market with one product are adding more to the mix on the same operational platform. Some of that is driven by investor demand, as advisors want an integrated solution they can assemble for a client, not a one-off opportunistic allocation.

Once a manager has a wrapper that works, has established a board and team, and has built the infrastructure around the first fund, the next fund is meaningfully less work. The familiarity with the daily valuation cadence carries over. The platform relationships carry over. On the first fund, you don’t know what you don’t know; on the second fund, you know the team, you know the process, and as you’re designing the product, you already know what you need to do to make it work.

It helps from a distribution standpoint as well. If wholesalers are already in the field having discussions about one fund, those same wholesalers can carry conversations about a second strategy.

The practical implication is to design a wrapper that accommodates a suite up front, even if you’re only launching one product. Retrofitting common servicing, pricing, and distribution across funds that launch independently is far harder than setting it up correctly the first time.

5. Platform readiness: Operations, technology, and distribution

None of the trends above matter if the fund can’t be distributed. On the same UMB Fund Services webinar, panelist James Curry of ACA Group put it plainly, “Large custodians generally won’t add a fund without evidence of demand already in hand.” The chicken-and-egg problem is one newer entrants consistently underestimate.

What helps is pre-existing platform relationships. We’re currently working with a manager that has a substantial relationship with a major platform in its private business, and that platform is engaged in onboarding well ahead of the N-2 filing that registers their fund ready for the public. That onboarding head start is the exception, not the rule. Most prospects come to us without those platform conversations already underway.

Our standard approach is to recommend an early follow-up call with a distribution expert to set expectations and establish the current lay of the land, because platform rules change frequently and platform owners set the terms. The goal is to eliminate surprises at the end of the process, because sometimes those are deal breakers.

It almost always takes longer to raise assets than managers expect. These products are typically sold, not bought. The managers with the most success have active internal sales and support teams with people dedicated to the product and the relationships built around it. The funds themselves are also more expensive to operate than many managers anticipate, and they need assets to support that. “If we build it, they will come” does not really work here. Distribution strategy belongs in the formation stage, not after launch.

On the operational and technology side, the picture continues to mature:

  • For daily-valued funds with less-liquid assets, a documented valuation policy and the involvement of third-party valuation services aren’t optional; the process must be as defensible as the number.
  • In the transfer agency, robotic process automation (RPA) and optical character recognition (OCR) continue to absorb tasks that used to consume meaningful human time, such as account opening, tender-request processing, and recurring reconciliation. This transformation frees our team and others for higher-value investor service.
  • Artificial intelligence (AI) is starting to appear in adjacent areas as well, including data aggregation, document processing, and contact-center tools, with a handful of firms experimenting with voice agents. Because these tools are being deployed in a heavily regulated context, expect correspondingly more disclosure about how AI is being used in portfolio management and operations.
  • Distributed ledger technology (DLT) is unlikely to displace incumbent fund-flow infrastructure in the near term. Yet, DLT solutions do have the potential to meaningfully change investor-account data sharing—and we are seeing funds actively embrace them.

Closing thought

For fund managers considering their next product, the most useful question may no longer be what strategy do I bring to market? It may be what platform and suite of products should I build, and is my operational and distribution infrastructure ready to support it?

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.