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The $19.5 Billion Dollar Industry No One Was Paying Attention To:

May 16, 2017

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The $19.5 Billion Dollar Industry No One Was Paying Attention To:

Interval and Closed-End Funds

May 16, 2017 | by Jared Schneider | Blue Vault

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Recent headlines have continued to talk about the decline in sales of some alternative investment types, but what is not discussed is the growth in other alternative investments. For example, the combination of interval funds and nontraded closed-end funds (“nontraded CEFs”) amounts to approximately $19.5 billion in assets under management as of December 31, 2016.

While many in the alternative investment industry have been focused on other investments, these nontraded CEFs and interval funds have been quietly growing, with big asset manager names like PIMCO, Blackstone, BlackRock, Apollo, Invesco, FS Investments and Griffin Capital. In 2016 alone, net capital inflows were well over $3 billion. There are a few reasons why these investments have been picking up steam as of late.

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One reason is that the structure allows for regular liquidity provisions through a tender offer or repurchase program, although still a relatively illiquid investment. Liquidity typically comes as a via a quarterly liquidity program versus daily as in a mutual fund structure.

Another reason is that the valuation policies allow the investments to sit in an RIA (registered investment adviser), hybrid, or self-directed brokerage account more easily.

Additionally, multiple share classes can accommodate different classes of investors and types of brokerage accounts.

There are drawbacks, of course, and Blue Vault will cover these topics in future articles. We will also delve into the types of assets in which these broad-reaching funds invest. For more information on Interval Funds and Nontraded CEFs, see our Interval Fund and Nontraded CEF Review.

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I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture.  For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments.  Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients.  I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.

John E. Moriarty, ChFC Founder & President, e3 ConsultantsGROUP December 2015 February 3, 2016