Institutional Investors Driving Interval Fund Growth
Interval funds are increasing in popularity among institutional investors and RIAs. One way to see this is to analyze the sales charge levels across available interval fund share classes:
(Premium members can view an interactive version of this chart, and download the underlying data)
The majority of the available share classes currently in the market have no sales charge at all. Less than a third of actively distributed share classes have sales loads above 4%. Consequently, RIAs have been quicker to embrace interval funds than broker dealers.
Interval Fund Sales Charges and AUM
The story is even more extreme when you look at where interval funds assets are concentrated.
The largest interval funds are raising capital exclusively from institutional investors and RIAs. The three active Stone Ridge funds, which together account for 45% of interval fund net assets, do not have any sales charge. The two Versus Capital funds, which together account for 12% of net assets, also do not have any sales charge.
Funds with multiple share classes have increasingly had the most success with low or no sales charge share classes. ACAP Strategic Fund, which is the second largest interval fund, is mostly selling its brokerage class shares. However, ACAP’s 3.0% max sales charge is relatively low by the standards of the space. Griffin Institutional Access Real Estate Fund started out with a traditional brokerage share class focused on the independent broker dealer channel, but its Class I share class has grown rapidly, and is now the largest in terms of net assets.
Interval funds have not replaced non-traded REITs in the independent broker dealer space. However, they have become an increasingly popular vehicle for institutional investors and RIAS with fiduciary duty to clients.