Tender Offer and Interval Fund Registrations Continue to Outpace Non-Traded REITs and BDCs

Tender offer and interval funds have become the structure of choice for alternative asset managers. Nonetheless, a small group of REITs and BDCS continues to raise capital and play an important role in investor’s portfolios.



(Note: this chart includes only new funds registering shares for the first time, and excludes follow-on offerings. Additionally, funds that offer multiple share classes via a master feeder structure are treated as a single fund)






Fundraising in NT REITs and BDCs has mainly consisted of a small group of legacy funds, rather than newly launched funds. Non-Traded REIT fundraising has been dominated by Blackstone, which as over 50% market share. Many legacy non-traded REITs and BDCs have also continued to raise capital through follow on offerings. Yet new fund’s have been few and far between. In contrast, more and more asset managers are launching tender offer and interval funds. As more financial advisers and asset allocators get comfortable with these structures, the trend is likely to continue.

Interested in the details?

Premium Members of Interval Fund Tracker can now access a full list of Tender Offer Funds, Interval Funds, Non-Traded REITs and BDCs registrations since 2016.

Interval Fund Market: 2018 Review

  • Interval fund net assets increased 41% in 2018, reaching $27.5 billion.
  • A record number of new funds launched in 2018.
  • Interval fund performance has been generally positive for funds with track records.
  • The government shutdown is temporarily delaying SEC review of pending interval fund registration statements.

Asset Growth and Fund Launches

Total net assets in interval funds increased 41% in 2018, reaching approximately $27.5 billion based on filings available at the end of the year. The SEC declared effective 16 interval fund registrations statements in 2018, including three in Q4.  Additionally, two privately offered interval funds launched in 2018. Overall 2018 was another year of historic growth for interval funds.



Although there are 60 active funds, the five largest alone account for 65% of total net assets. Many funds recently launched and are yet to gain fundraising momentum. Click here for AUM data on active interval funds.

Note All data in this post is based on SEC filings available as of  January 1, 2019 unless otherwise indicated. To access data and code behind this article, see Interval Fund Tracker’s Bitbucket repository.





Fastest Growing Interval Funds


Thirty-five active interval funds reported net asset growth in the most recent quarter,  and fifteen reported a decrease. In general, large asset managers continue to dominate fundraising.  The following list shows the five fastest growing interval funds, based on net asset growth in the most recent reported quarter

Interval Fund Market: 2018Q3 Update

  • Net assets in the interval fund sector have increased 50% in the past year. The majority of growth is concentrated in the largest funds.
  • BlackRock filed an initial registration statement, joining PIMCO, Blackstone, Nuveen, and several other major asset managers in providing an interval fund solution. BlackRock’s interval fund will implement a diversified credit strategy.
  • Detailed competitive intelligence on fund structures and investment strategies is available through Interval Fund Tracker’s premium data product.

Interval Fund Asset Growth

Interval fund asset growth accelerated slightly in 2018Q3. Total interval fund net assets equalled $26.2 billion as of the most recent public filings, up 50% compared to the prior year, and 13% compared to the prior quarter.

Although new entrants are gaining share, interval fund assets remain highly concentrated. The five largest alone account for 65% of total net assets. Click here for AUM data on active interval funds.

Note All data in this post is based on SEC filings available as of October 1, 2018, unless otherwise indicated.  To access data and code behind this article, see Interval Fund Tracker’s Bitbucket repository.

Fastest Growing Interval Funds

Thirty-six active interval funds reported net asset growth in the most recent quarter, twelve reported a decrease. Additionally, eight recently launched funds have still not yet filed their first financial statements. In general, large asset managers continue to dominate fundraising. The following list shows the ten fastest growing interval funds, based on net asset growth in the most recent reported quarter.

Interval Fund Market: 2018Q2 Update

Interval Fund AUM growth continues apace.  Total interval fund net assets equaled $23.3  billion as of the most recent public filings available at the end of 2018Q2, up 48% compared to the prior year, and 9% compared to the prior quarter.

Filings released subsequent to the end of the quarter increased the total net assets to over $24.9 billion.

Interval fund assets remain highly concentrated. Although there are over 50 active interval funds,the five largest alone account for approximately two-thirds of total net assets.   The following table shows the ten largest funds by net assets based on data available as of July 13, 2018:

 

Fund Reporting Period Net Assets MRQ* % of total
Stone Ridge Trust II(Stone Ridge Reinsurance Risk Premium Interval Fund) April 30 $6,057,814,943 24.9%
Stone Ridge Trust V February 28 $3,166,896,731 13.0%
ACAP Strategic Fund March 21 $2,685,832,936 11.0%
Versus Cap Multi-Manager RE…LLC March 31 $2,184,487,819 8.8%
Griffin Institutional Access RE Fund March 31 $2,143,713,412 9.0%
Stone Ridge Trust III April 30 $1,548,580,667 6.4%
Total Income (plus) RE Fund March 31 $930,960,667 3.8%
Pioneer ILS Interval Fund April 30 810230127 3.0%
Versus Capital Real Assets Fund LLC March 31 $802,733,509 3.3%
Invesco Senior Loan Fund February 28 $740,187,763 1.7%

* July 8, Stone Ridge Trust II released a new filing indicating net assets have increased from $5.02 billion to $6.06 billion.

Fastest Growing Interval Funds

Twenty nine active interval funds reported net asset growth in the most recent quarter. Fourteen reported a decrease, and seven reported no change.  The five fastest growing interval funds alone accounted for over 70% of the quarterly increase in net assets for the entire niche. Astute readers will notice substantial overlap between the lists of largest and fastest growing interval funds. The following list shows the ten fastest growing interval funds, based on net asset growth in the most recent reported quarter

 

Fund Date of Reporting Period Net Assets Increase MRQ
Stone Ridge Trust II(Stone Ridge Reinsurance Risk Premium Interval Fund) April 30 $1,040,278,920
ACAP Strategic Fund March 31 $275,233,158
Stone Ridge Trust V February  28 $266,877,918
Versus Capital Real Assets Fund LLC March 31 $238,077,084
Versus Cap Multi-Manager RE…LLC March 31 $188,599,970
Weiss Strategic Interval Fund March 31 $175,567,199
PIMCO Flexible Credit Income Fund March 31 $147,093,000
Pioneer ILS Interval Fund April 30 $133,811,479
Griffin Institutional Access RE Fund March 31 $120,362,565
Total Income (plus) RE Fund March 31 $65,535,061

 

Fee structures are becoming more standardized, and several service providers have become critical to the interval fund ecosystem.  For additional detailed information on fund structure trends in the interval fund space click here.

Pipeline of new funds

Growth of the interval fund pipeline accelerated in 2018Q2.   Pace of fund registrations and launches is a strong leading indicator of future sector growth.

New Fund Registrations

Seven  interval funds filed initial registration statements with the SEC in 2018Q2.

Fund Registration Date Strategy
Oppenheimer ILS Interval Fund 2018-06-13 Insurance Linked Securities
American Beacon Apollo Total Return Fund 2018-06-11 Other
Hatteras Reinsurance Fund 2018-05-15 Insurance Linked Securities
City National Rochdale Strategic Credit Fund 2018-05-14 Credit
FS Multi-Alternative Income Fund 2018-04-17 Other
Variant Alternative Income Fund 2018-04-13 Credit
Savyon Trust Group, Inc. 2018-04-10 Credit

Credit strategies, broadly defined, continue to be the most popular among fund managers getting ready to launch an interval fund.

New Funds Declared Effective

The SEC declared effective 5 interval fund registrations statements in 2018Q2. Additionally, one interval fund offering shares via a private offering started raising capital in 2018Q2. This is an acceleration in pace compared to prior quarters.

The public interval fund offerings declared effective in 2018Q2 are shown in the following table:

Fund Name Effective Date Strategy Maximum Offering Proceeds
American Beacon Sound Point Enhanced Income Fund 2018-06-29 Credit $250,000,000
NexPoint Latin American Opportunities Fund 2018-06-25 Credit & Equity $100,000,000
OFI Carlyle Global Private Credit Fund 2018-05-31 Credit $1,000,000,000
NexPoint Healthcare Opportunities Fund 2018-05-10 Credit & Equity $100,000,000
Destra International & Event Driven Credit Fund 2018-05-09 Credit $126,000,000

(Note the Flat Rock Opportunity Fund also launched during the first week of the third quarter. It was declared effective on July 2)

Interval Fund Research White Papers

Interval fund AUM growth continues at a robust pace

Interval Fund Market: 2018Q1 Update

Interval fund AUM continues to grow. Total interval fund net assets equaled $21.2 billion as of the most recent public filings, up 58% compared to the prior year, and 7% compared to the prior quarter.

Interval fund AUM growth in recent months has been driven by increasing acceptance from institutional investors and fiduciary investment advisers. Most sales of new share classes have been without sales commission.

Fastest Growing Interval Funds

Thirty-two active interval funds reported net asset growth in the most recent quarter. The ten fastest growing interval funds accounted for over 90% of the quarterly increase in net assets for the entire niche. The following list shows the ten fastest growing interval funds, based on net asset growth in the most recent reported quarter

 

Fund Date of Reporting Period Net Assets Increase  MRQ
Versus Capital Real Assets Fund LLC December 31, 2017 $171,438,620
Stone Ridge Trust V November 30, 2017 $170,501,396
Griffin Institutional Access RE Fund December 31, 2017 $149,906,670
Versus Cap Multi-Manager RE…LLC December 31, 2017 $149,235,268
Stone Ridge Trust III October 31, 2017 $143,110,907
ACAP Strategic Fund December 31, 2017 $139,268,922
PIMCO Flexible Credit Income Fund December 31, 2017 $135,953,000
Total Income (plus) RE Fund December 31, 2017 $79,030,078
RiverNorth Marketplace Lending Corp December 31, 2017 $76,703,147
Stone Ridge Trust II(Stone Ridge Reinsurance Risk Premium Interval Fund) October 31, 2017 $67,352,205

Catastrophe events in 2017 including hurricanes Harvey, Irma and Maria, as well as the California wildfires have impacted the insurance linked securities sector. Consequently, asset growth at the Stone Ridge funds slowed down in late 2017, but demand from new investors kept them among the fastest growing funds. Pioneer ILS Inverval fund did experience modest outflows, and the most recent NAV is 8% below the prior quarter Nonetheless, catastrophe bonds continue to be a popular asset class among institutional investors. Investment Manager Marco Pirondini, quoted in Barrons recently, emphasized reinsurance as a source of income not correlated with the broader capital markets.  The insurance linked securiites sector accounts for 33% of total interval fund AUM.

Real estate strategies expanded rapidly in late 2017. Both of Versus Capital’s funds are rapidly expanding. Bluerock, which manages the Total Income (Plus) Real Estate Fund, has experienced increased fundraising across its entire platform. Likewise,  Griffin Institutional Access Real Estate Fund is among the fastest growing funds, and recently crossed the $2 billion mark. 

Pipeline of New Interval Funds

New fund registrations and launches  continued at a robust pace in 2018Q1.  This is the earliest leading indicator of future interval fund AUM growth.

New Fund Registrations

Four interval funds filed initial registration statements with the SEC in 2018Q1, each from experienced asset managers using the interval fund structure for the first time.

 

Fund Name Registration Date Strategy
Cliffwater Direct Lending Fund 2018-03-30 Credit
Flat Rock Opportunity Fund 2018-02-20 Credit
American Beacon Sound Point Enhanced Income Fund 2018-02-09 Credit
Weiss Strategic Interval Fund 2018-02-01
Long/Short Equity

Cliffwater Direct Lending Fund will focus on directly originated loans, using a multi-manager approach to allocate among multiple subadvisers. Cliffwater LLC will serve as the adviser.  Cliffwater LLC is widely known for its research in the credit space.  It created the Cliffwater Direct Lending Index, and the Cliffwater BDC Index.

Flat Rock Opportunity Fund will primarily invest in equity and junior debt tranches of CLOs. It may also invest in senior secured loans. Flat Rock Global, LLC advises the fund. Robert Grunewald founded Flat Rock in 2017. He previously ran Business Development Corporation of America and has worked with several asset managers and specialty finance firms.  Flat Rock Global also advises Flat Rock Capital Corp, a newly launched non-traded BDC.

American Beacon Sound Point Enhanced Income Fund will invest in a variety of credit-related instruments.  Targeted assets include corporate obligations and securitized and structured issues of varying maturities. American Beacon Advisers is the adviser, and Sound Point Capital Management LP is the sub-adviser. Sound Point has a total of $15.6 billion under management.  It also subadvises InPoint, a newly launched non-traded mortgage REIT that is raising capital in the independent broker dealer and RIA space.

Weiss Strategic Interval Fund will maintain both long and short positions in a variety of equity securities. Targeted exposure is 130% long/30% short. Weiss Multi-Strategy Advisers LLC is the adviser. Weiss Multi-Strategy Advisers has a total of $1.4 billion in assets under management.

New Funds Declared Effective

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