data on fund registratiosn indicates interval funds are a key source of credit products for retail investors.

The Next Evolution in Credit Products

The latest issue of Private Debt Investor includes an excellent article on interval funds in the broader context of credit products for investors.   The article cites data from Interval Fund Tracker, and includes interviews with several interval fund managers. It notes that interval funds are able to provide enhanced  yield while providing quarterly liquidity.   Additionally, the article discusses the role of credit interval funds in asset allocation.

According to Brook Taube at Medley Management(manager of Sierra Total Return Fund):

Access to private credit can help satisfy investors’ demand for yield. The fact that the [interval] fund offers liquidity on a quarterly basis makes it an attractive structure for retail investors.

According to Michael Reisner, co-chairman and co-chief executive at CION(manager of the Cion Ares Diversified Credit Fund):

If you look at BDCs as sector-specific products – eg, US mid-market – credit interval funds like ours are more diversified and a core holding, and should be the next evolution in credit products.

According to Marc Yaklofsky, senior vice-president and spokesman at FS Investments(manager of the FS Total Return Fund):

Versus Capital Real Assets Interval Fund

Versus Capital Launches Another Interval Fund

The Versus Capital’s new real assets interval fund was declared effective by the SEC on August 17, 2017. Versus Capital Real Assets Fund, LLC is seeking to raise $450 million in a continuous offering. Minimum initial investment is $10 million(RIAs can aggregate accounts to get to the minimum). The fund will have one share class. and the management fee will be 1.50% of net assets.

Versus Capital is familiar with the interval fund space. It also manages Versus Capital Multi-Manager Real Estate Income Fund LLC, an investment company with $1.7 billion in assets. See Active Interval Funds for more information on this fund.

Closed End Funds, Mutual Funds, and Interval Funds

The Investment Company Act of 1940: 77 Years Later

On this day in 1940, President Roosevelt signed the Investment Company Act of 1940.  Previously, both houses of congress had approved the ’40 Act unanimously. The ’40 Act, is the primary source of regulations for the multi-trillion dollar investment industry. The ’40 act defined and regulated investment companies, and provides investors with protections against conflicts of interest, misappropriation of funds, excessive fees, and undisclosed risks.

As he signed the bill, President Roosevelt declared:

We have come a long way since the bleak days of 1929…. I have great hopes that the act which I have signed today will enable the investment trust industry to fulfill its basic purpose as a vehicle to diversify the small investors risk.

What is a ’40 Act Fund?

The investment companies that the 1940 Act protections apply to are known as 1940 Act Funds, or ’40 Act Funds Broadly speaking, there are three types of  ’40 Act Funds: Closed End Funds, Open End Funds, and Unit Investment Trusts. Open end funds and closed end funds are the most common type of

Interval Fund Transfer Agents

Interval Fund Service Providers

Interval funds rely on a variety of third party fund service providers in order to operate.  An administrator oversees the operational performance ensuring it complies with regulatory requirements. An independent accounting firm performs annual audits and certifies the fund’s financial statements. The interval fund transfer agent keeps ownership records, and handles transaction processing. A CSV file with information on service providers for all active interval funds is available at the bottom of this post.

Interval Fund Transfer Agent Market Share

Several users of this site have asked about interval fund transfer agents. DST Systems leads the market, and currently serves as transfer agent for 26% of active interval funds.  See this whitepaper that DST Systems recently produced on exploring new product structures. UMB Services serves as transfer agent for 21% of interval funds. UMB Services recently wrote about its turnkey interval fund solutions in HedgeWeek.

The following chart summarizes interval fund transfer agent market share, as of August 2017:

 

Interval Fund Transfer Agents

Pathway Energy Infrastructure's Portfolio

Pathway Energy Infrastructure Converts to Interval Fund

On July 26, 2017, Pathway Energy Infrastructure’s board of directors approved the Company’s plan to convert to an interval fund. The change of this fundamental policy will be submitted to shareholders for a vote in a forthcoming proxy. The Company is also making adjustements to its investment strategy to focus on broader infrastructure opportunities. The new Company name will be “Pathway Capital Opportunity Fund.” Shareholders will need to vote on the change in an investment strategy as well. Details on the new structure and strategy are included in a draft registration statement

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