May 16, 2017

The $19.5 Billion Dollar Industry No One Was Paying Attention To:

Interval and Closed-End Funds

May 16, 2017 | by Jared Schneider | Blue Vault

Recent headlines have continued to talk about the decline in sales of some alternative investment types, but what is not discussed is the growth in other alternative investments. For example, the combination of interval funds and nontraded closed-end funds (“nontraded CEFs”) amounts to approximately $19.5 billion in assets under management as of December 31, 2016.

While many in the alternative investment industry have been focused on other investments, these nontraded CEFs and interval funds have been quietly growing, with big asset manager names like PIMCO, Blackstone, BlackRock, Apollo, Invesco, FS Investments and Griffin Capital. In 2016 alone, net capital inflows were well over $3 billion. There are a few reasons why these investments have been picking up steam as of late.

One reason is that the structure allows for regular liquidity provisions through a tender offer or repurchase program, although still a relatively illiquid investment. Liquidity typically comes as a via a quarterly liquidity program versus daily as in a mutual fund structure.

Another reason is that the valuation policies allow the investments to sit in an RIA (registered investment adviser), hybrid, or self-directed brokerage account more easily.

Additionally, multiple share classes can accommodate different classes of investors and types of brokerage accounts.

There are drawbacks, of course, and Blue Vault will cover these topics in future articles. We will also delve into the types of assets in which these broad-reaching funds invest. For more information on Interval Funds and Nontraded CEFs, see our Interval Fund and Nontraded CEF Review.