Interval Fund Market: 2017Q4 Update
A robust pipeline of new interval fund registrations indicates continued growth is likely throughout 2018. Total interval fund assets now exceed $23.8 billion. Total net assets for the sector grew 56% over the most recent 12 month period, to $19.9 billion. Although newly launched funds are gaining momentum, the sector is highly concentrated in the top 10 funds.
New Fund Registrations
|Fund Name||Registration Date||Strategy|
|OFI Carlyle Global Private Credit Fund||12/15/2017||Credit|
|Tortoise Tax-Advantaged Essential Assets Interval Fund, Inc.||12/15/2017||Credit|
|PIMCO Flexible Municipal Income Fund||11/30/2017||Credit|
|Destra International & Event Driven Credit Fund||11/15/2017||Credit|
|Sierra Real Estate Fund||11/13/2017||Real Estate|
|Broadstone Real Estate Access Fund, Inc.||10/13/2017||Real Estate|
Initial registration statements are a leading indicator of industry growth. Funds filing initial registration statements in late 2017 will usually begin raising capital by late 2018.
Six interval funds filed initial registration statements with the SEC in 2017Q4, compared to nine funds in 2016Q4. PIMCO registered the Flexible Municipal Income Fund, its second interval fund. PIMCO Flexible Credit Income Fund, launched in February 2017 and had net assets of $141.7 million as of September 30. Medley Management registered Sierra Real Estate Fund, its third interval fund. Medley Management’s Sierra Total return fund launched in July 2017. The Sierra Opportunity Fund is still pending effectiveness with the SEC. Four managers without any offerings currently structured as interval funds registered new funds in 2017Q4. Notable additions to the lineup include Carlyle and Broadstone,
There are currently 23 interval funds pending registration with the SEC. Credit strategies are by far the most popular among new entrants:
As in the prior quarter, creation of new interval funds has outpaced the creation of non-traded REITs and BDCs. Nonetheless, the new non-traded REIT entrants in 2017Q4 include several larger asset managers: Nuveen Global cities REIT, Starwood Real Estate Income Trust, and Rodin Income Trust.
Blackstone dominated 2017 non-traded REIT sales, with approximately one-third of market share by sales. Meanwhile, Blackstone also registered an interval fund earlier in 2017.
New Funds Declared Effective
|Fund Name||Effective Date||Investment Strategy||Maximum Offering Proceeds|
|Angel Oak Strategic Credit Fund||12/1/2017||Credit||$250,000,000|
|Pathway Capital Opportunity Fund||10/30/2017||Other||$773,393,896|
|FS Credit Income Fund||10/3/2017||Credit||$2,000,000,000|
The SEC declared effective 3 interval fund registrations statements in 2017Q4. These new funds bring over $3 billion in new shares for sale into the market. Note that Pathway Capital Opportunity Fund is formerly known as Pathway Energy Infrastructure Fund, restructured from a closed end fund focused on energy infrastructure.
Growth in Total Interval Fund Assets
The recent growth in the interval fund sector reflects increased investor demand for yield products and acceptance of the structure. Total interval fund net assets equaled $19.9 billion, up approximately 56%, from $12.7 billion just 12 months ago. Most interval funds use relatively moderate leverage or maintain net cash positions. Total gross interval fund assets totaled $23.8 billion as of the most recent filings.
Fastest Growing Funds
This list shows the fifteen interval funds with the largest increase in net assets during the most recent reporting period:
|Fund||Most Recent Reporting Period:||Net Asset Change MRQ|
|Versus Capital Real Assets Fund LLC||September 30,2017||$393,217,805|
|Stone Ridge Trust V||August 31, 2017||$335,493,076|
|ACAP Strategic Fund||September 30, 2017||$267,995,760|
|Versus Cap Multi-Manager RE…LLC||September 30, 2017||$171,236,857|
|Griffin Inst’l Access RE Fund||September 30, 2017||$162,804,814|
|Stone Ridge Trust III||October 31, 2017||$143,110,907|
|Total Income (plus) RE Fund||September 30, 2017||$80,539,341|
|PIMCO Flexible Credit Income Fund||September 30, 2017||$72,706,000|
|Stone Ridge Trust II(Stone Ridge Reinsurance Risk Premium Interval Fund)||October 31, 2017||$67,352,205|
|Griffin Institutional Access Credit Fund||September 30, 2017||$58,110,155|
|RiverNorth Marketplace Lending Corp||September 30, 2017||$47,421,997|
|BMO LGM Frontier Markets Equi..Fd||August 31, 2017||$25,428,520|
|USQ Core Real Estate Income Fund||September 30, 2017||$24,999,764|
|Resource Credit Income Fund||September 30, 2017||$23,032,294|
|Resource RE Diversified Income Fd||September 30, 2017||$13,751,469|
This growing momentum is continuing past the end of the most recent reporting period for many funds. For example, by late December 2017, Versus Capital Real Assets Fund(VCCRX) had added $170 million in net assets and RiverNorth Marketplace Lending Corp(RMPLX) had added $76 million in net assets.
Although many new entrants are gaining fundraising momentum, interval fund assets are increasingly concentrated in the largest funds. There are 43 total active funds , but the top ten funds account for 89% of net assets and the top 5 funds account for 69% of net assets.
|Fund||Total Net Assets||% of Total Interval Fund Net Assets|
|Stone Ridge Trust II(Stone Ridge Reinsurance Risk Premium Interval Fund)||$5,017,536,023||25.2%|
|Stone Ridge Trust V||$2,729,517,417||13.7%|
|ACAP Strategic Fund||$2,271,330,856||11.4%|
|Griffin Inst’l Access RE Fund||$1,873,444,177||9.4%|
|Versus Cap Multi-Manager RE…LLC||$1,846,652,581||9.3%|
|Stone Ridge Trust III||$1,517,996,946||7.6%|
|Invesco Senior Loan Fund||$789,469,855||4.0%|
|Total Income (plus) RE Fund||$786,395,528||3.9%|
|Voya SENIOR INCOME FUND||$457,196,747||2.3%|
|Versus Capital Real Assets Fund LLC||$393,217,805||2.0%|