Goldman Sachs is in the midst of a strategic realignment to focus more on alternative investment strategies and retail investors. The new Goldman Sachs interval funds are a prime example of this new approach, and a precursor to a massive structural change in the retail alternative investments industry. Goldman started reporting Consumer and Wealth Management […]
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.
Growth of the interval fund pipeline accelerated in 2018Q2. Pace of fund registrations and launches is a strong leading indicator of future sector growth.
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.
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 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.
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.
New fund registrations and launches continued at a robust pace in 2018Q1. This is the earliest leading indicator of future interval fund AUM growth.
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
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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.
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Interval funds are increasing in popularity among institutional investors and RIAs. One way to see this is to analyze the sales charge levels across available interval fund share classes:
(Premium members can view an interactive version of this chart, and download the underlying data)
The majority of available share classes currently in the market have no sales charge at all. Less than a third of actively distributed share classes have sales loads above 4%. Consequently, RIAs have been quicker to embrace interval funds than broker dealers.
The story is even more extreme when you look at where interval funds assets are concentrated.
The largest interval funds are raising capital exclusively from institutional investors and RIAs. The three active Stone Ridge funds, which together account for 45% of interval fund net assets, do not have any sales charge. The two Versus Capital funds, which together account for 12% of net assets, also do not have any sales charge.
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Broadstone Real Estate registered a new interval fund on October 13, targeting a $1 billion capital raise. According to the draft registration statement, Broadstone Real Estate Access Fund intends to invest in a portfolio of institutional quality real estate and real estate-related investments. The portfolio will include the following asset classes: (i) Direct Real Estate Investments, (ii) Private CRE Investment Funds, (iii) Publicly Traded CRE Securities, and (iv) CRE Debt Investments. The minimum initial investment is $2,500 for Class W shares and $1,000,000 for Class I shares.