Accredited investors looking to diversify their portfolios beyond publicly traded assets, such as stocks, bonds, and exchange-traded REITs, often turn to private real estate funds for income potential, tax efficiency, and exposure to tangible assets.
While private real estate funds are typically less volatile than public assets, understanding how a fund is structured is just as important as knowing what assets the fund holds, who manages it, and how it performs.
The structural “chassis” of a fund—whether it is open-end or closed-end—shapes how capital is invested, how liquid it is, and how the fund manager executes the strategy. While most traditional private investment vehicles are typically structured as closed-end funds, private offerings such as DLP Capital-sponsored funds embrace open-end models to offer investors ongoing access and greater flexibility.
Open-end funds: The evergreen advantage
An open-end fund, also known as an evergreen fund, is designed to exist indefinitely rather than winding down after a finite timeline.1 Similar in concept (but not in liquidity) to a mutual fund, a private open-end REIT, like the DLP Housing Fund, allows investors to invest, exit, or redeem fund shares on their own timeline, subject to the fund’s redemption provisions.
Key advantages of open-end private real estate funds include:
Immediate deployment and reduced cash drag
In an open-end structure, new investor capital and proceeds from asset sales are continuously reinvested into new opportunities as they become available. This contrasts with closed-end funds, which can leave capital sitting idle until a deal is found.
By recycling capital on an ongoing basis, open-end private investment vehicles like the DLP Lending Fund and DLP Preferred Credit Fund are designed to minimize the cash drag that occurs when uninvested cash—which earns little to no return—is not deployed.
Liquidity and flexibility
While most open-end funds are not as liquid as publicly traded assets, they typically offer periodic redemption windows that provide liquidity to investors who may need to access their capital sooner than expected. This structure is central to all DLP Capital-sponsored funds, which feature either 90-day or annual redemption windows.
Open-end funds are also designed to exist indefinitely, and do not have a forced liquidation date, meaning managers can hold assets through market cycles without being forced to sell when values are soft.
Closed-end funds: The fixed-term approach
Private equity and private credit funds are traditionally structured as closed-end funds. These funds raise capital over a defined period, execute a specific business plan over a timeline—typically 5 to 10 years—and then liquidate and return capital to investors.2
Benefits of closed-end private real estate funds include:
Targeted business plans
Once a closed-end fund’s capital is raised, the window to invest closes, no new capital enters, and investors are generally committed until the manager sells the assets.
While this reduces liquidity, it serves a specific purpose for certain value-add or development projects by providing the manager with stable, patient capital to pursue strategies that require long development timelines or significant upfront investment.
For example, the DLP Living Fully Community Fund is structured as a closed-end fund because developing large-scale, master-planned communities requires a long runway and committed capital that remains in place while projects are designed, built, and transformed into Thriving Communities.
The lock-up period also protects closed-end funds from early redemptions, allowing managers to carry out a long-term business plan without having to worry about paying out investors who redeem early.
Potential for appreciation
Closed-end funds have the opportunity to undertake heavier development projects with value-add strategies that have the potential to target higher total returns than open-end funds. In contrast to the steady, immediate income targeted by open-end funds, the bulk of returns realized by closed-end funds are weighted toward appreciation and may be realized later in the fund’s lifecycle, once assets are completed or sold.
Open-end or closed-end real estate funds can both be a good fit
Both open-end and closed-end private real estate funds can play a role in a diversified portfolio. But whether they’re a right fit depends on an investor's goals, preferences, and time horizons.
Investors seeking potential income, the ability to reinvest distributions, and liquidity if life throws a curveball may find an open-end fund is better aligned with their goals. To provide a flexible foundation for accredited investors, most offerings in DLP Capital’s private real estate platform are structured as evergreen funds.
By contrast, investors looking to allocate patient capital toward a specific, high-impact development project—and have proactively planned for longer hold periods in pursuit of potentially higher total returns—may find a closed-end vehicle like the DLP Living Fully Community Fund a natural complement to public asset or open-end private investments.