Due Diligence

Griffin Capital : How Interval Funds Operate

How Interval Funds Operate

A key defining feature of an interval fund is that they are regulated under the 1940 Act.  This provides critical protections for investors.  DLA Piper released a handbook discussing the 1940 Act and related statues and regulations that apply to and otherwise bear on the interval fund operations. The information covers the key regulatory framework for 40 Act Funds, as well as the impact of recent regulatory changes.
According to DLA Piper:

 ….an interval fund can be a suitable vehicle in which to run “alternative” strategies – i.e., strategies that are designed to produce returns that are not highly correlated to the broader stock and bond markets. Interval funds also mesh well with certain noteworthy regulatory initiatives – for example, FINRA’s new customer statement rule (RN 15-02), and the Department of Labor’s fiduciary rule and accompanying BIC exemption – making them attractive vehicles for use by independent broker dealers and other financial advisors that must operate within the complex regulatory environment.

Additionally, Griffin Capital, which operates the Institutional Access Credit Fund, and the Institutional Access Real Estate Fund…

Research Resources

This regularly updated Research page provides the best interval fund research sources for asset managers launching closed end interval funds, and for investors considering using the interval fund structure to achieve asset allocation goals.

Topics covered include:
Background and Industry Research
Legal/Structure Guides
Fund Sponsor Research

If you have a piece you think should be added to the Research page , or are seeking customized research, please email [email protected]

Why aren’t there more publicly traded interval funds?

Most publicly traded interval funds do not trade on an exchange. Many people in the industry speak of interval funds as if they are always non-traded. However it is possible for an interval fund to be publicly traded. Currently, of the ~40 active or and recently launched interval funds, the Blackrock Enhanced Government Fund (EGF) is the only one that is publicly traded. Or put differently, of the >500 publicly traded closed end funds, EGF is the only one that is structured as an interval fund. It offers to repurchase 5-25% of its shares annually, and charges a repurchase fee of 2%. Since it is an interval fund, the repurchase plan can be suspended only with shareholder approval.

Comparing The New Credit Funds

With a whole slew of credit interval funds hitting the market this year, its time to compare the basic structures and fee arrangements.  The chart below consists of funds that have been declared effective within the past year, all from familiar sponsors.  Within the broader category of credit, there are a lot of substrategies, but its no coincidence, that all of the Sponsors for these funds have marketed BDCs to retail investors in the past.

What is an interval fund?

Interval funds typically operate as a fund of funds, offering investors exposure to a diversified portfolio of alternative investments through one vehicle. Many major alternative investment managers, REIT and BDC sponsors have registered interval funds in recent months. A variety of regulatory and market pressures are driving the growth of interval funds, but lack of data makes it difficult for investors to evaluate choices. The purpose of Interval Fund Tracker is to increase transparency of the interval fund universe.

1 2 3