Interval funds reached a total net asset value of $86.4 billion during the first six months of 2024, up 10.9% from the end of the first quarter, according to new data from Robert A. Stanger & Co.
This data roughly matches that of Morningstar recent overview of the sector, which counted 100 funds with $80.7 billion in assets under management as of the end of May, with essentially all of that total coming from RIAs. (Interval funds, which are a type of closed-end mutual fund that includes periodic liquidity, typically allowing redemptions of up to 5% per quarter, were also a hot topic at Morningstar's recent investor conference.)
Meanwhile, XA Investments' latest monthly update for the unlisted closed-end fund market (which monitors interval funds and tender offer funds) pegged the current total at 110 interval funds with $101.6 billion in total assets under management.
Based on XA Investment research, there are 230 effective interval funds and tender offers as of June 30 with a total of $150 billion in net assets. Additionally, XA expects the total to reach 235 to 255 funds by the end of the year with $160 billion to $175 billion in projected net assets.
“In 2023, the gap fund market was hurt by the exits from real estate-focused funds,” said XA Investments president Kimberly Flynn. “As the ratio trends for real estate funds have continued into 2024, we have seen continued growth from the credit and private equity segments of the gap fund market. We observe 50 funds currently in the SEC registration process.”
The pace of departures
According to Stanger, nine new interval funds went live during the quarter and another 11 filed registration statements. Overall, there are about 40 new interval funds with pending registrations.
A recent survey by Cerulli Associates found that alternative asset managers are extremely good at structuring the interval fund as a diversification opportunity. Overall, 54% of asset managers surveyed said they were using the interval fund structure, while 76% said they saw it as a “huge opportunity”, beating out all other vehicles.
Interval funds that became effective in the second quarter included products from Beacon Pointe, John Hancock, Stepstone and others, according to the website. IntervalFundTracker.com.
“After a strong start to the year, we forecast that range funds will reach $27 billion in capital formation in 2024, a 35% increase from the $20 billion raised in 2023,” the chairman said in a statement. and Stanger CEO Kevin T. Gannon.
Overall, according to Stanger, 28 hedge funds have surpassed $100 million in fundraising, but not all asset managers are created equal. Cliffwater LLC, which operates two private credit-based interval funds, owns nearly a quarter of all interval fund assets. In 2024 alone, Cliffwater-sponsored interim funds have amassed $4.9 billion of $11.3 billion in gross fundraising year-to-date — 43% of gross sales, according to Stanger.
“We believe the RIA community has become too institutional,” said Cliffwater CEO Stephen L. Nesbitt. WealthManagement.com IN a recent interview. “You don't sell to them; you have to create a long-term partnership or relationship with them, unlike wires or some of the banks, where they just try to get paid to sell something. VNRs are similar and more institutional, where they create a long-term relationship with their clients. We must do the same.”
In addition to Cliffwater, Stanger pointed out infrastructure interval funds gaining some market traction.
“Year-to-date gross sales have exceeded $144 million, with minimum purchases of less than $1 million through May,” Gannon said. “Stanger anticipates continued expansion of assets under management (AUM) and new market participants for these funds.”
According to Stanger, there are currently five infrastructure-based interval funds with a combined net asset value of $3.2 billion.