Harrison Street Opens Interval Fund Auction to Ease Liquidity Pressures

Going once. Going twice. Sold! 

As redemption pressures continue to test interval funds, a first-of-its-kind auction mechanism may offer investors a new path to liquidity. On Friday, Harrison Street Real Estate’s VCMIX fund began a three-week intraperiod auction process designed to ease redemption bottlenecks while helping funds better manage liquidity. It’s an intriguing, and potentially important, development for private-market investors, according to Max Curtin, a senior manager research analyst for Morningstar, who just published an in-depth analysis of the process alongside fellow analyst Jason Kephart. If the auction works, it could help advisors and their clients invest more confidently in interval funds. If it doesn’t, it might prompt even more redemption requests for stressed funds, like VCMIX. 

“Auctions like this have happened in other contexts, but this looks novel for interval funds,” Curtin told Advisor Upside. “Speaking from the outside, it’s going to be key to see the mechanisms of the process. Executing the auction needs to be error free. They’ll also want to see strong participation, which isn’t guaranteed for something that’s brand new.” 

A Liquidity Imbalance 

Interval funds invest in hard-to-sell private assets like private credit and real estate while promising periodic share repurchases, which are typically capped at 5% to 25% of outstanding shares per quarter. When requests exceed caps, funds respond by making payouts on a pro-rata basis, which may leave investors waiting many quarters for full capital access. 

“The idea of an auction targets this persistent liquidity problem, which for VCMIX has lasted for 15 consecutive quarters,” Curtin said. “The fund isn’t alone in that trajectory. Spikes in market volatility and negative alternative-asset headlines have driven redemption requests past quarterly limits for major managers, so I’m sure other issuers will be watching this closely.” 

Key details about the process include: 

• Sellers will choose from preestablished targets, such as a 5% discount to the fund’s net asset value, to potentially redeem shares outside of the normal quarterly window. 
• Buyers, meanwhile, place bids based on the same preset target discount rates.
• Shares trade hands at the conclusion of the three-week auction window, and only at the price with the highest number of matches, limiting the possibility for buyers and sellers to transact at different prices.

Once the auction is concluded, another two consecutive quarters of proration are required to trigger the next one. Ultimately, Harrison Street hopes to cut down on, or even halt entirely, the number of prorations it has imposed on investors’ redemption requests, Curtin said. 

No Forced Conversions. If it’s a success, the auction offers a potentially better alternative to forced fund conversions. Curtin contrasted the approach with Bluerock Private Real Estate’s 2025 conversion to a listed closed-end fund, after which shares traded at more than a 40% discount to NAV, highlighting the risks investors can face when liquidity pressures intensify.