Quick answer
What is the difference between an interval fund and a non-traded BDC?
An interval fund is a registered closed-end fund that must offer to repurchase 5–25% of its shares at fixed intervals under Rule 23c-3. A non-traded BDC is a business development company that lends mainly to private US companies and offers liquidity through discretionary tender offers, usually capped around 5% of shares a quarter, which the board can reduce or suspend.
Key takeaways
- 01Interval fund repurchases are mandatory; BDC tenders are discretionary.
- 02BDCs must hold 70% eligible portfolio companies.
- 03BDCs may run about 2:1 leverage; interval funds about 1:2 under 1940 Act limits.
- 04Both distribute most income, taxed mostly as ordinary dividends.
| Interval fund rule | Rule 23c-3 |
|---|---|
| BDC definition | 15 U.S.C. §80a-2(a)(48) |
| Interval liquidity | Mandatory 5–25% offers |
| BDC liquidity | Discretionary tenders, often ~5%/quarter |
| Largest non-traded BDC | BCRED, about $86B AUM (Q4 2025) |
| Tax | Usually RICs; ordinary dividends |
The Short Answer
What is the difference between an interval fund and a non-traded BDC?
An interval fund is a registered closed-end fund that must offer to repurchase 5–25% of its shares at fixed intervals under Rule 23c-3. A non-traded BDC is a business development company that lends mainly to private US companies and offers liquidity through discretionary tender offers, usually capped around 5% of shares a quarter, which the board can reduce or suspend.
BDCs must invest at least 70% of assets in eligible private or small US companies and may borrow up to roughly 2:1 debt to equity. Interval funds can hold a wider range of assets but face stricter leverage limits. Both are usually taxed as regulated investment companies that distribute most of their income.
Side by Side
How do interval funds and non-traded BDCs compare?
| Feature | Interval fund | Non-traded BDC |
|---|---|---|
| Legal form | Registered closed-end fund | Closed-end fund electing BDC status |
| Liquidity | Must offer 5–25% at fixed intervals | Board-discretionary tender offers |
| Typical redemption cap | 5% per quarter (most common) | About 5% per quarter |
| What it holds | Any illiquid assets | 70%+ eligible US private/small companies |
| Leverage limit | 300% asset coverage on debt (≈0.5:1) | 150% asset coverage (≈2:1) |
| Tax | Usually RIC; 1099-DIV | Usually RIC; 1099-DIV |
Liquidity in Practice
Which is more liquid?
On paper, the interval fund: its repurchase offers are a fundamental policy that can only change with a shareholder vote. A non-traded BDC's board decides each quarter whether to run a tender and how large. In late 2025 some large non-traded BDCs saw redemption requests approach or reach their quarterly caps, a reminder that "quarterly liquidity" is a ceiling, not a promise.
Interval fund
Repurchase offer must happen on schedule; pro rata if oversubscribed.
Non-traded BDC
Tender offer is discretionary; can be reduced or skipped in stress.
Scale
How big are non-traded BDCs?
Chart
Largest non-traded BDCs by assets, Q4 2025 (billions)
Blue Vault reported an average one-year total return of 7.16% across the open non-traded BDCs it tracks for that period.
Where Embark fits
Interval funds and BDCs both start with cash. What could your stock target in income instead?
Run your ticker to see the income a position could target without a taxable sale.
- Starts with appreciated stock you already own instead of new cash for a credit fund
- §721 in-kind contribution: $0 tax at contribution, no sale to fund the allocation
- Targets 10%+ annual income; a target, not a guarantee, with a 3-year lock-up
Run the numbers
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Taxes
How are interval funds and BDCs taxed?
Both usually qualify as regulated investment companies under the tax code, which means they avoid corporate tax by distributing at least 90% of their taxable income. Investors receive a 1099-DIV. Because the income is mostly loan interest, most distributions are ordinary dividends taxed at your marginal rate, not at qualified dividend rates, plus the 3.8% net investment income tax where it applies.
Choosing
Which should you choose?
Do
- Prefer interval funds if contractual liquidity matters to you
- Compare net-of-fee returns and PIK share, not distribution rates
- Hold either in a tax-deferred account if possible
Don't
- Assume a BDC tender will always run at 5%
- Use either for money needed within 3 years
- Overlook servicing and distribution fees on advisor share classes
Embark
Is there a route that does not need cash?
Both vehicles are bought with cash, so a stockholder usually sells shares, and pays capital gains tax, to fund them. Embark accepts appreciated stock in kind under §721 with $0 tax at contribution and targets 10%+ annual income. Exposure is to the contributed stock and Embark's strategy; 3-year lock-up; target, not guarantee; accredited investors only.
FAQ
Frequently asked questions
Is a non-traded BDC the same as an interval fund?
No. Both are illiquid closed-end structures, but BDCs offer discretionary tenders and interval funds must make scheduled repurchase offers.
Can a BDC stop redemptions?
Yes. A non-traded BDC's board can reduce or suspend tender offers.
How much leverage can a BDC use?
BDCs must maintain 150% asset coverage, allowing about $2 of debt per $1 of equity.
Are BDC dividends qualified?
Mostly not. BDC income is largely interest, so most distributions are taxed as ordinary dividends.
What is BCRED?
Blackstone Private Credit Fund, the largest non-traded BDC, with about $86 billion of assets in Q4 2025 per Blue Vault.
Do interval funds have minimums?
Many have low minimums for retail share classes; some institutional classes require more.
Sources
Primary sources
Sources
- 17 CFR §270.23c-3: Repurchase of securities of closed-end companies (interval funds)
- 15 U.S. Code §80a-2(a)(48): Definition of a business development company
- 26 U.S. Code §852: Taxation of regulated investment companies and their shareholders
- Blue Vault Partners: Nontraded BDC fundraising and returns, Q4 2025
- Federal Reserve FEDS Notes (May 2025): Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications
Cite this article
Embark Funds Research. “Interval Funds vs Non-Traded BDCs Two Doors to Private Credit.” Embark Funds, updated October 29, 2026. https://www.embarkfunds.com/insights/interval-funds-vs-non-traded-bdcs
Not tax, legal or investment advice: This article is educational and is not tax, legal, investment or Medicare advice. Rules and dollar amounts change every year and depend on your facts. Work with a CPA or financial planner before acting. Embark income figures are targets, not guarantees. Contributed shares have a 3-year lock-up, and Embark is open to accredited investors only.
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