XA projects specialty structures to grow more than 20% a year

XA Investments counted 26 specialty structure funds in the market during the second quarter of 2026. That was a 13% increase over the prior quarter. The Chicago consulting firm, which tracks interval and tender-offer funds, projects the category to grow more than 20% a year in the U.S., WealthManagement reports.

Specialty structures sit in a distinct part of the evergreen market. They include 3(c)(7) funds and operating companies, raising money from both institutional and private wealth channels. These vehicles promise higher returns and stronger stakeholder protection than evergreen funds built for individual investors. The trade-off is liquidity: high barriers to entry, fewer redemption mechanisms.

Blackstone provided the template. It filed Blackstone Private Equity Strategies Fund LP in 2022. The vehicle launched in early 2024. The 3(c)(7) fund combines more than 15 of Blackstone's private equity strategies into a single vehicle. By June, Blackstone reported a $17.6 billion net asset value. Second-quarter fundraising came to $2.4 billion. June alone brought in $1.2 billion, the fund's best month since launch. Jonathan Gray, the firm's president and COO, said the fund's largest share class has returned 20% net annualized since inception. The second quarter was roughly 8% net, he said.

Asset managers are taking notice. Cerulli Associates finds that 41% of asset managers currently offer a 3(c)(7) fund. That compares with 79% who offer interval funds. Another 11% are actively developing 3(c)(7) vehicles. A further 15% plan to build them.

This year's registrations show the format spreading. HarbourVest Private Equity Secondaries Fund LP registered as a 3(c)(7) vehicle. HPS Real Assets Lending Company LP filed as an operating company centered on credit. Fidelity Core Real Estate Fund, another operating company, is built around real estate.

Kimberly Flynn, XA's president, expects specialty structures to outgrow interval and tender-offer funds. Those funds have been compounding at 20% to 25% a year. That puts the vehicles alongside the semi-liquid market rather than inside it. They share the evergreen format, but they are built for longer commitments. Advisers who are used to periodic repurchase offers will need a different way to judge these vehicles.

The investment case depends on growth. Specialty structures must deliver the higher returns they promise because the exit mechanisms are thinner. A down-cycle in valuations will show how the structures perform, and the scarcity of repurchase windows will make the wait harder. XA's count suggests sponsors are willing to accept that risk.