The Rise of Alternative Credit: How INTVL-C is Reshaping Benchmarking and Risk Assessment in the Interval Fund Space

The alternative credit market has emerged as a cornerstone of modern portfolio diversification, driven by its ability to generate returns uncorrelated with traditional asset classes. Yet, for all its growth, the sector has long grappled with a critical challenge: the lack of standardized benchmarks and transparent performance metrics. This void has made it difficult for investment managers to assess risk, compare strategies, and communicate value to stakeholders. Enter the XAI Interval Fund Credit Index™ (INTVL-C), a groundbreaking benchmark designed to address these gaps in the fast-evolving credit interval fund space.

A New Benchmark for a Complex Asset Class

The INTVL-C, set to launch in Q1 2026, is a total return index that tracks 54 non-listed closed-end interval and tender offer funds with majority allocations to credit strategies such as direct lending, asset-backed lending, and structured credit. Unlike generic benchmarks, it is tailored to the unique characteristics of credit interval funds, including distribution reinvestments and illiquid holdings. By factoring in these elements, the index provides a more accurate reflection of net total returns, a critical metric for managers evaluating performance against peer groups.

This specificity is a response to the market's growing complexity. As of Q3 2025, the interval and tender offer fund universe had expanded to 304 funds, managing $215 billion in net assets-a 60% increase since 2023 according to financial reports. Credit-focused funds, in particular, have seen a surge in activity, with 11 new launches in the past year alone as reported by industry data. Such growth underscores the need for a benchmark that captures the nuances of credit strategies, enabling managers to navigate a fragmented landscape with greater clarity.

Enhancing Transparency and Performance Clarity

Transparency has been a persistent pain point in interval funds, which typically trade infrequently and lack real-time pricing. The INTVL-C aims to mitigate this by offering daily performance data, rebalanced quarterly to reflect market shifts. This regular recalibration ensures that the index remains representative of the sector's evolving dynamics, from credit cycles to regulatory changes.

For investment managers, this level of transparency translates into actionable insights. By comparing their fund's performance against the INTVL-C, managers can identify underperforming strategies, optimize capital allocation, and demonstrate value to limited partners (LPs). According to a report by XA Investments, the index's launch will enable "more informed investment decisions and meaningful comparisons among peer funds" as stated in official communications. This is particularly valuable in a market where LPs increasingly demand granular data to assess risk-adjusted returns.

A Framework for Robust Risk Assessment

Risk assessment in credit interval funds has traditionally relied on backward-looking metrics, such as leverage ratios or historical default rates. The INTVL-C introduces a forward-looking dimension by aggregating performance data across a diversified pool of funds. This allows managers to stress-test strategies against macroeconomic scenarios and identify systemic vulnerabilities.

For instance, the index's inclusion of funds with varying credit exposures-from senior secured loans to mezzanine debt-enables a nuanced analysis of sector-specific risks. As noted by XA Investments, the broader XAI Interval Fund Index (INTVL), which tracks 93 interval and tender offer funds across asset classes, has already served as a critical tool for understanding market trends. The INTVL-C builds on this foundation by narrowing the focus to credit, where risks are often more pronounced due to the illiquid nature of underlying assets.

Market Context and Future Outlook

The timing of the INTVL-C's launch is both strategic and urgent. The interval fund market has matured rapidly, with daily valued interval funds now dominating due to their accessibility and liquidity advantages according to market analysis. Meanwhile, credit strategies have gained traction as investors seek yield in a low-interest-rate environment. By providing a dedicated benchmark, the INTVL-C not only supports existing managers but also lowers the barrier to entry for new players, fostering innovation while maintaining accountability.

However, challenges remain. The index is not directly investable due to SEC restrictions on illiquid assets as explained in regulatory filings, a limitation that underscores the need for complementary tools. Nonetheless, its role as a diagnostic and comparative instrument is undeniable. As one industry analyst observes, "The INTVL-C fills a critical gap in the alternative credit ecosystem, offering a lens through which managers can navigate complexity with confidence" according to market commentary.

Conclusion

The rise of alternative credit is inextricably linked to the development of robust benchmarks like the INTVL-C. By enhancing transparency, refining performance metrics, and enabling proactive risk assessment, the index addresses the core needs of investment managers in a market defined by growth and uncertainty. As the sector continues to evolve, the INTVL-C stands as a testament to the power of innovation in bridging the gap between complexity and clarity.