Most interval funds do not trade on an exchange. Many people in the industry speak of interval funds as if they are always non-traded. However it is possible for an interval fund to be publicly traded. Currently, of the ~40 active and/or recently launched interval funds, the Blackrock Enhanced Government Fund (EGF) is the only one that is publicly traded. Or put differently, of the >500 publicly traded closed end funds, EGF is the only one that is structured as an publicly traded interval fund. It offers to repurchase 5-25% of its shares annually, and charges a repurchase fee of 2%. As with all interval funds, the repurchase plan can be suspended only with shareholder approval.
According to the Fund’s website:
The Fund’s investment objective is to provide shareholders with current income and gains. The Fund seeks to achieve its investment objective by investing primarily in a portfolio of US Government securities and US Government Agency securities, including US Government mortgage-backed securities that pay interest in an attempt to generate current income, and by employing a strategy of writing (selling) call options on individual or baskets of US Government securities, US Government Agency securities or other debt securities held by the Fund in an attempt to generate gains from option premiums.
The following table summarizes the EGF’s portfolio:
|Assets:||$ value||% of total|
|Non-Agency Mortgage-Backed Securities||995,391||0.9%|
|U.S. Government Sponsored Agency Securities||63,646,498||56.2%|
|U.S. Treasury Obligations||40,790,012||36.0%|
EGF has achieved an average annualized return of 3.4% since inception.
Sit Investment Associates owns over 37% of EGF outstanding shares, and has filed a 13D, along with multiple amendments. However Sit Investment Associates has not pursued any changes with the Fund’s management. As of May 11, 2017, EGF trades at an approximately 5% discount to NAV.
There have been more publicly traded interval funds in the past. For example, the India Fund, Inc(IFN) and Asia Tigers Fund (GRR) were both launched as regular traded closed end funds. They both traded at a discount consistently, and in a 2002, shareholders of the Asia Tigers Fund voted to convert to an interval fund. In 2003, the India Fund followed. Both funds functioned as interval funds for about 10 years. However, in 2013, the respective boards of each fund approved shareholder resolutions to eliminate the interval fund structure, and switch back to being regular closed end funds. Shareholders at both funds voted in favor of the change in early 2014. Both funds adopted “targeted discount policy” to buy back shares when they trade at a discount.) However, the board can change the targeted discount policy without shareholder approval.
Both funds currently trade at approximately 9% discounts to NAV.
Will the new breed of interval funds go public?
None of the recently launched interval funds have overt plans of one day becoming public. There is benefit to doing a continuous capital raise, rather than a one shot IPO. Once a fund is public, it can be difficult to issue more shares if they trade at a discount. With non-traded funds, as long as investors avoid a rush to the exit, investors needing liquidity will be able to get it, and the manager can build up AUM. Note that basically all of the interval funds launched in the next year do quarterly tender offers, rather than semi annual or annual. Consequently, the continued tender offers would be a bit more labor intensive unless the funds raise a lot of capital(most are targeting $1-$2billion)