An investor deciding to allocate to private credit faces a second decision that matters nearly as much as the first: through which structure?
The same strategy is frequently available as a traditional partnership, an interval fund, a non-traded BDC, and sometimes a listed vehicle. The underlying loans may be nearly identical. The investor experience — cost, liquidity, tax reporting, eligibility, disclosure — differs substantially.
This page maps the structures. Each links to a full guide.
The comparison
| | Eligibility | Capital | Liquidity | Tax form | Disclosure | |—|—|—|—|—|—| | Drawdown partnership | Accredited, often QP | Called over time | None until realisation | K-1 | Contractual | | Interval fund | Broad | At subscription | Committed periodic repurchase, capped | 1099 | Prospectus + reports | | Tender offer fund | Often accredited/QP | At subscription | Discretionary repurchase, capped | 1099 | Prospectus + reports | | Non-traded BDC | Broad | At subscription | Capped repurchase programme | 1099 | Position-level filings | | Listed BDC | Broad | At purchase | Daily, at market price | 1099 | Position-level filings | | Non-traded REIT | Broad | At subscription | Capped repurchase programme | 1099 | Prospectus + reports | | DST | Accredited | At subscription | None | Grantor letter | Contractual | | Syndication | Accredited | At closing | None until sale | K-1 | Contractual | | Hedge fund | Accredited, often QP | At subscription | Periodic, with lock-ups and gates | K-1 | Contractual |
The three families
Drawdown structures
The traditional private fund. Investors commit, capital is called over an investment period, the portfolio is held, and proceeds are returned as investments are realised. Fixed life, generally around a decade.
Suits investors with scale, patience, the ability to manage capital calls, and access to strong managers. The waterfall economics — carried interest subject to a preferred return, paid on realisations — remain the best-aligned fee structure in the market when properly constructed.
Costs illiquidity with no floor, cash drag on uncalled commitments, K-1 complexity, and a J-curve.
Registered semi-liquid vehicles
Interval funds, tender offer funds, non-traded BDCs, and NAV REITs. Registered, broadly available, invested at subscription, with capped periodic repurchases.
Suits investors who cannot access or do not want drawdown structures — no capital calls, generally 1099 reporting, prospectus disclosure, and low minimums.
Costs generally higher headline fees, capped liquidity that binds under stress, and — in perpetual structures — ongoing fees that accrue for as long as the position is held rather than on a declining base. See semi-liquid funds.
Single-asset and special-purpose structures
DSTs, syndications, and SPVs holding one investment.
Suits investors who want to evaluate a specific asset, or who need a structure serving a particular purpose — a DST as 1031 replacement property being the clearest case.
Costs concentration, complete dependence on one sponsor, and no diversification within the position.
The point that matters most
The same strategy in different wrappers does not produce the same outcome.
Three mechanisms cause the divergence:
Fee structures differ. A drawdown fund charging on invested capital with carry on realisations, and a perpetual vehicle charging continuously on NAV with a periodic performance fee, produce different lifetime costs even at identical headline percentages.
Constraints differ. Registered vehicles face statutory limits on leverage and holdings. A BDC must hold 70% in eligible assets and is capped on borrowing. A private fund is bounded only by its documents. Constraints protect and they also limit.
Liquidity provisions cost something. An interval fund must maintain liquid assets against its repurchase offers. Those assets earn no illiquidity premium — so a portion of the portfolio is structurally not doing what the investor is paying for. A drawdown fund has no such requirement and can stay fully invested.
An investor comparing a private credit partnership with a private credit interval fund is not choosing between two ways of buying the same thing. They are choosing between different net exposures, different cost profiles, and different failure modes.
Choosing
The questions that actually determine the answer:
- Am I eligible? Accredited, qualified purchaser, or neither. See accredited investors.
- Might I need this capital? If yes, a drawdown fund is wrong, and a semi-liquid vehicle should still be sized as a long-term holding.
- Can I manage capital calls? If not, evergreen or registered structures.
- Does K-1 complexity matter to me? For many taxable individuals this decides it before any investment consideration.
- How much diligence can I do? Less capability argues for diversified, disclosed vehicles over single-asset structures.
- Over what horizon? Perpetual vehicles’ ongoing fees compound; drawdown fee bases decline.
For an independent, unaffiliated list of sponsors and service providers active in the space, see the SQX Alts directory.
This guide is educational and general; it is not investment, tax, or legal advice. Structures and terms vary materially; review the offering documents for any specific vehicle.
Frequently Asked Questions
What types of alternative investment funds are there?
The main categories are traditional closed-end drawdown partnerships, registered semi-liquid vehicles such as interval and tender offer funds, business development companies, non-traded REITs, Delaware statutory trusts used in 1031 exchanges, hedge funds with periodic redemption terms, and unregistered evergreen structures.
Which alternative fund structure is best?
None is best in general. The right structure depends on the investor’s eligibility, liquidity needs, tax situation, and tolerance for administrative complexity. The same underlying strategy is often available in several wrappers with materially different costs, liquidity terms, and reporting.
What is the difference between a drawdown fund and an evergreen fund?
A drawdown fund takes commitments and calls capital over an investment period, has a fixed life, and returns capital as investments are realised. An evergreen fund takes capital fully at subscription into an existing portfolio, has no fixed term, and offers exits through capped periodic repurchases.
Which structures issue 1099s rather than K-1s?
Vehicles taxed as regulated investment companies or REITs generally issue 1099s — interval funds, tender offer funds, BDCs, and REITs. Partnerships and LLCs taxed as partnerships issue K-1s, which includes most traditional private funds and syndications. Delaware statutory trusts typically issue a grantor letter.
Do different wrappers holding the same strategy perform the same?
Not necessarily. Fee structures differ, registered vehicles face constraints on leverage and holdings that private funds do not, and liquidity provisions require some vehicles to hold liquid assets that earn no illiquidity premium. The strategy may be the same while the net outcome to the investor differs.
Sources
- Investment Company Act of 1940, including Rule 23c-3 and Sections 3(c)(1), 3(c)(7) and 54-65
- Internal Revenue Code Subchapter K and Subchapter M
- Securities Act of 1933, Regulation D, Rule 506
