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.

Nobody likes paying taxes, but these accounts could be the ibuprofen to that headache.

Long-short strategies have been a staple of hedge funds serving institutional and ultra-high-net-worth investors for decades, but they’ve recently migrated into separately managed accounts. That has opened up the strategy to wealth management clients. It’s still early innings, but tax-managed long-short SMAs are quickly gaining popularity. Last year, 33% of advisors identified tax-managed, long-short SMAs as the products they were most interested in adding to their portfolios, according to a Cerulli survey. This year, that figure has climbed to nearly 60%. Improving tax capabilities has also been a top concern for advisers this year.

“With many wealth managers turning to tax optimization to drive alpha in their portfolios, tax-aware long-short strategies can be a very attractive option to generate additional tax-loss harvesting opportunities,” said Michael Manning, a Cerulli research analyst. The approach can be particularly useful for high-net-worth clients who have appreciated stock positions or are about to sell a business. But advisors must weigh the benefits against the strategies’ complexity, leverage and additional fees, he said.

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Do guilty pleasures really need to feel so … guilty?

Nearly three-quarters of consumers feel remorse about spending on joy rather than investing in other financial goals, according to Ally Bank. While more acute for younger generations, guilt is still prevalent among retirees; advisors who discuss those reactions can not only help clients align their spending and values so that they enjoy their purchases but also differentiate themselves from competitors.

“Our job is to help our clients feel good about their financial situation, and if your clients are living in a world where there’s guilt associated with action, or fear, or stress, we’re not doing our job,” said Sofia Figueroa, an advisor at Ellevest. Plus, having these conversations is a great way to actually get to know your client. “It really allows you to curate your guidance towards what matters to them, and that’s what creates a sticky relationship.”

Permission Slip

Sometimes, telling people it’s OK to spend can actually attract a client. Bryan Byrer, founder of Millennial Financial Planning, was discussing spending with a prospective client who, after a parent’s early death, decided to invest in her health and was spending about $150 per month on fitness and nutrition programs. She said something like, “I know that’s too much to spend,” opening a conversation about her values. “I don’t want my clients, at least if they can legitimately afford it, to feel like this thing that helps them live out their values is actually bad,” Byrer said. “That’s actually one of the ways that she ended up becoming a client. She said, ‘I’ve never had anyone say it’s OK for me to spend on myself.’”

More findings from the survey:

• Women are more likely than men to feel guilty about spending on joy, with 75% feeling at least some guilt compared with only 68% of men. The gap is even more pronounced among those who feel a lot of guilt, with 25% of women reporting that reaction and only 15% of men.
• One culprit behind the feelings of guilt may be the lack of a dedicated joy budget. Although 68% of respondents reported spending on joy monthly, only 39% actually budgeted for it.

Old Dogs, New Tricks. Baby boomers are least likely to feel guilty about their spending, but more than half still do. That makes sense after a lifetime of saving, Figueroa said. “We’re talking about decades of the same repeated patterns and behavior. That is not going to change overnight,” she said. For those clients, it takes repeated conversations about how their drawdown strategy is actually cautious to get them to begin to feel good spending. Having these talks early on helps. “I’m actually having those conversations preemptively to try and mitigate some of that need for intense behavioral shifts down the line,” said Figueroa.