4. Publicly registered Non-Traded Business Development Company (“BDC”)
BDCs are typically structured to provide access to direct lending opportunities. Non‑traded BDCs are unlisted and regulated by the SEC and registered with the states.
Investor Eligibility: Investors are required to meet certain income and/or net worth thresholds, and investors in certain states may be subject to additional liquid net worth and income requirements.
Subscriptions & Redemptions: Shares are continuously offered, typically on a monthly or quarterly subscription schedule.
Non-traded BDCs are typically structured as tender offer funds. Liquidity is generally provided through periodic (e.g. quarterly) tender offers, the timing and size of which is subject to Board approval. If a tender offer is oversubscribed, shares will be repurchased on a pro rata basis. While tender offer timing and size remain at the Board’s discretion, many non-traded BDCs adopt consistent practices to support marketability (e.g., quarterly tender offers for 5% of shares outstanding).
Underlying Portfolio: At least 70% of total assets must be invested in “qualifying assets,” which is generally defined as privately offered debt or equity securities of U.S. private companies or U.S. publicly traded companies with market capitalizations of less than $250 million.
5. Publicly registered Non-Traded Real Estate Investment Trust (“REIT”)
REITs are designed to provide access to real estate and real estate related investments. Non‑traded REITs are unlisted and regulated by the SEC and registered with the states.
Investor Eligibility: Investors are required to meet certain income and/or net worth thresholds, and investors in certain states may be subject to additional liquid net worth and income requirements.
Subscriptions & Redemptions: Shares are continuously offered, typically on a monthly or quarterly subscription schedule.
Liquidity is generally provided through share repurchase programs, typically allowing for repurchases of up to 2% of shares outstanding per month and/or 5% per quarter, although the REIT’s Board retains the discretion to amend or suspend repurchases if it determines such action is in the best interest of shareholders.
Underlying Portfolio: At least 75% of total assets must be invested in real estate and at least 95% of income must be derived from qualifying sources.
6. Operating Company (Conglomerate)
An operating company conglomerate is a large corporation that conducts its own operating business and, at the same time, holds controlling ownership positions in several smaller companies across a range of unrelated industries.
Investor Eligibility: Shares can be offered publicly (with effective SEC registration statement and state registrations) or privately (limited to accredited investors).
Subscriptions & Redemptions: Continuously offered, typically on a monthly or quarterly subscription schedule.
Liquidity, where offered, is generally provided through discretionary share repurchase programs following an initial ramp‑up period and is typically capped (for example, at 5% of shares outstanding per quarter).
Underlying Portfolio: At least 60% of the portfolio must be controlled by the operating company or held through subsidiaries that finance specific projects.
7. Private Funds
Private funds are also not listed on an exchange. Private funds pool assets to invest in non-publicly traded assets with long-term capital commitments typically.
Investor Eligibility: Private funds require investors to be Qualified Purchasers (that access directly or via a feeder) or accredited investors. Moreover, they usually have high investment minimums (typically $1-10mm). The management fee is usually charged on committed and/or invested capital; typically tiered based on size of commitment. In terms of performance fees, the majority of private funds charge carried interest as defined by the fund’s distribution waterfall.
Subscriptions & Redemptions: Private funds are most commonly closed-ended in nature, with finite fundraising periods, investment periods, and fund terms. However, certain private funds (typically core Real Estate funds) may be open-ended. Open-ended private funds typically offer quarterly, semi-annual, or annual liquidity (usually on a best-efforts or inflow-matching basis), while closed-ended do not.
Underlying Portfolio: Private funds are able to hold a greater concentration of illiquid securities than evergreen funds.
Choosing the right wrapper
Eligibility considerations sit at the center of vehicle structure selection. While alternative strategies may be compelling, the structures through which they are delivered can meaningfully influence liquidity, cash‑flow expectations, tax outcomes, and client experience.
Advisors should evaluate not only the underlying investment exposure, but also eligibility requirements, redemption mechanics, valuation practices, and the degree of complexity each wrapper introduces. Aligning these structural features with a client’s time horizon, risk tolerance, and financial objectives is critical to setting appropriate expectations and ensuring alternatives are implemented thoughtfully and responsibly within the broader portfolio.
As access to alternatives continues to expand, fund and vehicle structures are evolving to help bridge the gap between private markets and wealth portfolios. For advisors, understanding these structures is a critical step toward using alternatives thoughtfully and effectively within client portfolios.