Education

Comparing Interval Funds to Open-End Mutual Funds

July 25, 2017

Interval Funds have several key similarities with open-end mutual funds, but they are not identical. Mutual funds and interval funds both offer shares on a continuous basis at NAV. Mutual funds and interval funds are both “40 Act Funds” that provide investor protections from the Investment Company Act of 1940. Mutual funds by definition allow daily redemptions, but interval Funds provide limited liquidity at set intervals. This diagram, from the recently launched Sierra Total Return Fund, compares and contrasts Open-End Mutual Funds, Closed-End Funds, and Interval Funds:

Investors May Soon Be Hearing More About Interval Funds

July 10, 2017

Recent links:
What are Interval Funds? – Wall Street Journal

Some researchers think there will be both a need and a demand for exposure to such assets in the near future. Low returns from traditional investments by historical standards will lead to a “steady stream of assets moving into alternative investments,” says a 2016 report from consulting firm McKinsey & Co. “These flows will be redirected heavily toward illiquid private markets.”

Interval funds may also provide a boost for financial advisers in a world where passive investing in funds that track market indexes is the rage.

“What retail investors now hold is largely a portfolio of passive exchange-traded funds, so the alternative-assets domain is how the adviser will add value to the client,” says Kimberly Flynn, managing director of XA Investments LLC in Chicago.

Alts offer a new course- – Financial Advisor Magazine

Pioneer ILS Interval fund hits $305m, some loss impact in half-year -Artemis

Also, registration is still open for the Adisa Due Diligence Forum. This event is designed for industry professionals who are employed with a Broker-Dealer, RIA, Family Office, Due Diligence Firm, or select others, that offer alternative investments in their business.

How Interval Funds Operate

May 29, 2017

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…

Why aren’t there more publicly traded interval funds?

May 11, 2017

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

April 26, 2017

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.

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