CONTENT

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• English (en)

• Title

• TENDER-OFFER-FUNDS-DESCRIPTION

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• -

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• Tender offer funds are closed-end funds that offer an unlimited number of shares, sell them on a continuous basis and, at the discretion of the fund's board of directors/trustees, may periodically offer to repurchase a certain portion of shares from shareholders ("tenders" or "redemptions"). Although tender offer fund purchases resemble open-end mutual funds in that their shares are typically continuously offered, they differ from other closed-end funds and traditional open-end funds in that their shares are not sold on a secondary market. Instead, like interval funds, periodic repurchase offers are made to shareholders by the fund.

  
  Tender offer funds have a higher degree of discretion and flexibility regarding share repurchase practices than are available to interval funds. While interval and tender offer funds are both unlisted closed-end funds with periodic repurchases and limited liquidity, tender offer funds have flexibility in how frequently and to what threshold of total shares they can offer redemptions. Tender offer funds conduct periodic tender offers at the discretion of the fund's board. Because there is no guarantee of a tender offer, investors may not be able to access their money and should consider the funds to be illiquid. If a tender offer fund conducts a tender offer, it will specify a date by which shareholders must accept the offer. The actual repurchase will occur at a later, specified date. If the number of shares tendered by a shareholder exceeds the number of shares that a fund offers to repurchase during the tender offer period, repurchases may be prorated (reduced by the same percentage across all trades) prior to processing. In such event, shareholders may not be able to redeem their expected amount, and would potentially experience increased illiquidity and market exposure, which could increase the potential for investment loss. 

  
  Risks:

  • Tender offer funds are not required to offer repurchases at Net Asset Value (NAV).  There is a risk that the fund will offer to repurchase shares but at a discount to the NAV that is struck.
  • Tender offer funds can use leverage which can magnify both gains and losses.
  • Tender offer funds tend to invest in illiquid assets which can be difficult to value and to sell.
  • Tender offer funds are not required to carry any minimum percentage of cash or liquid assets to meet redemptions.  Hence, to meet redemptions, tender offer funds may rely on leverage or even new client subscriptions. Payment of redemption proceeds may be delayed to match the liquidity timeline of their underlying investments.
  • Subject to the discretion of the fund manager, a tender offer fund may charge a redemption fee.
  • Fees for tender offer funds tend to be higher than fees for mutual funds and exchange traded funds.

  (0123-2L5Z)

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