Hybrid funds

Hybrid funds combine illiquid investment strategies with the liquidity and hedging strategies of open-ended hedge funds, offering investors access to the returns of alternative investments combined with the liquidity of listed instruments, along with built-in diversification.

These funds can provide exposure to a wide variety of asset types, including publicly listed equity, real estate, infrastructure, derivatives, and illiquid investments such as distressed debt, private credit and CLOs. Depending on the structure and terms of a hybrid fund, they can also offer investors the opportunity to withdraw and add capital on an ongoing basis, at specified intervals.

The often complex or “non-standard” nature of hybrid funds poses challenges from an administration perspective with the need to combine data feeds from multiple systems and potentially providers, along with enhanced reporting and analytics.

If you need help with fund administration, contact our team of experts.

Hybrid funds differ from traditional vehicles in that they can hold more than one type of asset; for example, a hedge fund manager may launch a hybrid fund to target high-yielding illiquid distressed debt alongside more traditional listed equities. This offers managers a much greater level of flexibility, and the ability to make investments in two or more asset classes from the same fund.

The different categories of hybrid funds are:

Evergreen funds: In an evergreen fund, returns from realisations are recycled back into the fund to finance new investments rather than distributed to LPs.

Open-ended/semi open-ended: Open-ended hybrid funds also have no close date, but distribute the capital returned after realising investments to investors. Semi open-ended funds sit between open- and closed-ended funds, in that they may have a closing date, but also extension periods, and the ability to re-invest and to admit new investors under certain conditions.