As financial advisors become more comfortable with private-market allocations, much of the attention has focused on interval funds, tender offer funds, non-traded business development companies and non-traded REITs, but another corner of the evergreen fund market is gaining traction.
These specialty structure vehicles, including 3(c)(7) funds and operating companies, raise money from both the institutional and private wealth channels, offering the potential for higher returns and better protection for stakeholders than evergreen funds aimed exclusively at individual investors. However, they come with high barriers to entry and fewer liquidity mechanisms.
In the second quarter of 2026, there were 26 funds in the specialty structure category in the market, according to XA Investments, a Chicago-based consulting firm that tracks interval and tender-offer funds. The figure represented 13% growth over just one quarter. Some newly registered funds in 2026 included HarbourVest Private Equity Secondaries Fund LP, structured as a 3(c)(7) vehicle, HPS Real Assets Lending Company LP, structured as an operating company and focusing on credit, and Fidelity Core Real Estate Fund, another operating company focusing on real estate.
A recent survey by Cerulli Associates found that 41% of asset managers currently offer 3(c)(7) funds (compared to 79% who offer interval funds). Another 11% are actively developing such vehicles, and 15% plan to do so in the future.
Blackstone set the trend in motion when it launched Blackstone Private Equity Strategies Fund LP (BXPE). It filed the fund with the SEC in 2022 and took it live in early 2024. Other asset managers soon followed suit. BXPE promises investors exposure to over 15 of Blackstone’s private equity strategies through a single fund. As of June, the firm reported the fund’s net asset value at $17.6 billion.
During its second-quarter earnings, Blackstone reported BXPE raised the most of all its private wealth funds, amassing $2.4 billion in the quarter. In June alone, it raised $1.2 billion, the best month of sales since the fund’s launch.
“BXPE has achieved a remarkable 20% net annualized return since inception for its largest share class, including approximately 8% net in the second quarter, powered by its outstanding portfolio positioning,” Blackstone President and COO Jonathan Gray said during the earnings call.
Looking forward, Kimberly Flynn, president of XA Investments, which closely tracks the space, expects growth of specialty structure vehicles in the U.S. to exceed the 20% to 25% compounded annual growth rate of interval funds and tender offer funds. Part of the reason is the preference for these funds among the wealthiest private clients, who view them as offering exclusivity in a way 40 Act funds don’t, Flynn noted. “It’s the cream of the crop alternative managers who are launching products of this nature,” she said. “And some of the most prestigious asset managers are going to specialize on the far upper [side] of that [wealth] spectrum.”
“I would expect to see really strong growth [in these funds] over the next three to five years,” agreed Kyle Walters, analyst at private markets research firm PitchBook. On the one hand, individual investors are showing strong interest in private equity allocations, as the asset class has historically outperformed other investments. At the same time, asset managers are becoming more creative about how they approach the private wealth channel “because it’s such a vast market, and they are seeing new avenues to explore,” he said.
While specialty structure vehicles have existed for decades (they fall under the purview of the Securities Exchange Act of 1934), asset managers have historically avoided them due to the extra paperwork, including the requirement to file quarterly and annual reports with the SEC. But as some of the world’s biggest asset managers begin to tap into the private wealth channel for capital, structuring their investments as 3(c)(7) funds and operating companies gives them the ability to go after individual investors without drastically changing the way they do business, Flynn said.
“If you are an institutional alternative asset manager, you manage money in a certain way, and you charge certain fees,” she noted. “So, there is some inertia—they want to offer the private funds more broadly, but they don’t want to change their fee structure, and they want to manage the money the same way they do for institutions. So, these 1934 Act products are mixed in terms of the clients that are in them between small institutions, family offices and wirehouse retail investors.”
Because 1934 Act funds operate largely like traditional private funds and require a qualified purchaser designation to participate, they are not available to mass affluent investors. Flynn described them as a “half-step” toward a fund aimed at retail investors—they “diversify the revenue base, but it’s not a full step into a 40 Act fund,” which comes with extensive legal and compliance requirements.
In addition, operating a 34 Act fund allows asset managers to add an unlimited number of investors and provides greater flexibility to buy majority stakes in companies, which can be a complicated undertaking with a 40 Act product and its stipulations around asset diversification, as both Flynn and Walters noted.
So, what do these funds offer high-net-worth investors besides a feeling of exclusivity? To begin with, there is the assumption that participating in a fund that comes with performance fees better aligns investors’ and managers’ interests, creating the expectation of higher yields than would not be possible with an interval or a tender offer fund, according to Flynn. Walters notes 3(c)(7) funds typically feature the traditional “2 and 20” fee model, which combines a 2% annual management fee with a 20% carried interest fee.
These types of funds also eliminate the need for an intermediary distribution channel and can give larger LPs more negotiating power, he added.
But there is a reason they are not meant for everyone in the private wealth space. While most 3(c)(7) fund managers like to offer quarterly liquidity, they are not obligated to do so. If at any point they feel it is in the best interest of the fund shareholders to cap or stop redemptions entirely, they will do so, Flynn said. That can give investors who plan to stick with it for the long term a sense of comfort, but anyone who wants a guarantee of being able to withdraw their money might be better served by an interval fund.
Specialty structure funds also require K-1 filings and take away a lot of the convenience that has made interval and tender offer funds so appealing to financial advisors and their clients. At the end of the day, they work best for ultra-high-net-worth investors who are likely already invested in traditional private funds, can handle long liquidity lock-ups and have an accountant on staff to handle their tax forms, Flynn noted.