Unlisted CEFs: Key Asset Growth and Fund Launch Trends Continue in 2024

April 23, 2024

Unlisted closed end funds(CEFs) are continuing their rapid growth in 2024. As of the most recent SEC filings, there are a total of $75.3 billion net assets in interval funds, and $60.9 billion net assets in tender offer funds. Year over year net asset growth is 19.3% for interval funds, and 20.3% for tender offer funds.

There are currently 93 interval funds and 96 tender offer funds that have reported assets.

Asset Concentration

AUM growth in the unlisted CEF market remains highly concentrated. The five largest interval funds account for 48.1% of net assets in the category. Cliffwater Corporate Lending Fund, the largest interval fund, accounts for 20.6% of interval fund net assets. The five largest tender offer funds account for 42% of net assets in the category. Partners Group Private Equity (Master Fund), the largest tender offer fund, alone accounts for 23.1% of total tender offer fund net assets.

The growth of interval funds is becoming more and more dominated by private credit funds. There are currently $43.9 billion in net assets in Credit interval funds, approximately 58% of total net assets. Real Estate is still a major component of the niche, with 25% of total net assets. Credit interval fund net assets are up approximately 10% so far this year, while real estate interval fund net assets have declined.

Although private credit is the leading strategy for interval funds, private equity continues to be the main driver of tender offer fund growth. PE/VC tender offer funds accounted for 51.6% of total net assets as of the end of 2024Q1. Fund of Hedge Funds is the second largest category, with 21.8% of tender offer fund net assets.

Fund Launch Pipeline

After a record setting 4th quarter in 2023, interval fund registrations continued at a rapid pace in 2024Q1. There were a total of 10 new interval fund registrations, and 6 tender offer fund registrations in 2024Q1.

The fund launch pipeline indicates overall growth is likely to continue for unlisted closed end funds. Additionally, we can tell from fund registration trends that private credit will continue to be the most popular strategy. There are nearly 50 interval funds that have filed registration statements with the SEC, but are still pending effectiveness. Out of these pending registrations, approximately 45% are credit funds, and 25% are real estate funds. Within the real estate and private equity space there are an increasing number of infrastructure focused strategies. The large “other category” is also revealing. An increasing number of managers are coming to market with unique strategies that they want to offer to the mass affluent market in an interval fund sector.

Public Vs Private Offerings

Approximately 61% of tender offer funds registered since 2020 have raised capital exclusively through private placements. In contrast, only one interval fund(Gemcorp Commodities Fund) has registered to raise capital exclusively through a private offering since 2020. From the perspective of the fund manager, a private offering means lower up front costs, but the offer must be limited to accredited investors. A higher portion of tender offer funds aimed at institutions and accredited investors. On the other hand, most interval funds are designed to appeal to a wider audience of mass affluent investors.