What Does Fund Size Say About Liquidity?

Our latest analysis of actively repurchasing funds highlights a clear but often overlooked pattern in how liquidity constraints emerge:

The Top 10 largest repurchasing funds fit neatly into just five size groups, yet utilization levels vary widely—some are highly oversubscribed, while others have ample capacity.

The Bottom 10 funds, however, span ten distinct size groups and consistently show higher utilization rates, particularly in smaller funds.

What’s driving this?

• Smaller funds face oversubscription risk by default, regardless of market sentiment. Their size alone makes them more vulnerable.

• Larger funds, by contrast, are somewhat protected due to size alone. Instead, oversubscription in these funds is more often triggered by external pressures, such as:

• Performance challenges leading to investor outflows

• Changes in distribution amounts or frequency

• Shifts in shareholder base, particularly aging investors rotating capital elsewhere

This divergence underscores a key dynamic in non-traded and interval fund liquidity: Size won’t prevent extreme pro-ration, but it can delay it. A large fund can absorb outflows for longer, but once sentiment shifts—whether due to performance, income expectations, or macro factors—the impact can be significant.

Would love to hear from those navigating today’s redemption landscape—are you seeing similar trends?

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