Regulations

Comparing BDCs and Interval Funds

With Financial Times coverage of closed end interval funds, and the recent growth in credit focused closed end funds, its a good time to compare the business development company structure to the closed end fund structure(including interval funds). Both provide investors with protections under the 1940 Act, and BDCs are also technically a type of closed end fund, but BDCs have several key differences in terms of fees, regulatory and filing requirements, and investment restrictions. These differences are important for investors, asset managers, and those involved in fund distribution.

Here are interactive tables comparing BDCs and Closed End Interval Fund:

Using a Little-Known Type of Fund for Private-Company Exposure

The Wall Street Journal had an article a while back discussing a type of situation where a financial adviser found interval funds to be a great fit for a client. The interval fund used here is SharesPost 100 Fund (PRIVX), but a similar process would likely apply for many different funds.

According to the adviser in the article:
“What’s interesting to me about closed-end interval funds is that clients get access to these [private] companies, but they have the transparency and regulatory benefits of the mutual-fund structure,”

Top 5 Interval Fund Whitepapers

Interval Fund Tracker keeps tabs on the best industry research covering interval funds.  See the   Research section for additional resources and ongoing updates.

Here are the Top 5 Interval Fund Whitepapers in the industry today.

Launching Innovative Strategies With Continuously Offered Closed-End Funds – DST kasina

Best balanced review of the benefits and challenges of interval funds and other continuously offered closed-end funds.  It also puts interval in their proper context in the broader fund universe.  This is a must read for any Sponsor that is considering launching a fund, or any BD/RIA that plans to offer interval funds.  A few key quotes:

Finally, with much of the negative press associated with non-traded REITS, and an unwillingness among many advisors to invest in business development companies (BDCs), an interval or tender offer closed-end fund structure might be a better option for managers seeking to introduce new and less-liquid real estate or energy investment strategies…

…Sponsors of interval funds need to ensure their national account, sales, marketing and product teams are working symbiotically to educate and engage advisors at the right time during their decision-making process. This includes both in-person and digital engagement. Naturally, some broker/dealer platforms are more receptive than others. Several asset managers have found a receptive home for their interval funds among small- to mid-size broker/dealers. In those cases, the firm’s National Accounts team diligently identified the fund needs of the platform, and worked closely with the platform gatekeepers to position the fund. In addition, they selected several members of their internal/external sales team to actively support platform advisors…

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