Interval funds’ total net assets will reach $86.4 billion by the first half of 2024, up 10.9% from the end of the first quarter, according to the latest data from Robert A. Stanger & Co.
The data is roughly in line with Morningstar’s recent overview of the sector, which said there were 100 funds with $80.7 billion in assets under management as of the end of May, with most of that total coming from RIAs. (Interval funds are a type of closed-end mutual fund that are periodically liquid and allow for redemptions of up to 5% typically quarterly; they were a hot topic at Morningstar’s recent investor conference.)
Meanwhile, XA Investments’ latest monthly update on the unlisted closed-end fund market (which monitors both interval funds and tender offer funds) puts the total number of interval funds at 110, with total assets under management of $101.6 billion.
According to research from XA Investment, there were 230 active interval offer and tender offer funds with a total of $150 billion in net assets as of June 30. Furthermore, XA predicts that by the end of the year, that total will reach 235-255 funds with net assets of $160-175 billion.
“In 2023, the interval fund market was hit by outflows from real estate-focused funds,” said Kimberly Flynn, president of XA Investments. “The prolation trend for real estate funds continues in 2024, while the credit and private equity segments of the interval fund market continue to grow. We currently have 50 funds in the SEC registration process.”
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Nine new interval funds became effective during the quarter and 11 more registration statements were filed, Stanger said. Overall, there are nearly 40 new interval funds waiting to be registered.
A recent survey by Cerulli Associates found that alternative asset managers are very bullish on the interval fund structure as a distribution opportunity: Overall, 54% of asset managers surveyed said they use the interval fund structure, and 76% said they see it as a “significant opportunity,” outperforming all other avenues.
Interval funds that went into effect in the second quarter included products from Beacon Point, John Hancock and StepStone, according to the website IntervalFundTracker.com.
“Following a strong start to the year, Interval Funds expect to achieve total capital formation of $27 billion in 2024, an increase of 35% from the $20 billion raised in 2023,” Stanger Chairman and CEO Kevin T. Gannon said in a statement.
Overall, 28 interval funds have raised more than $100 million, Stanger said, but not all asset managers are equal. Cliff Water LLC, which runs two private credit-based interval funds, manages nearly a quarter of interval fund assets. In 2024 alone, Cliff Water-sponsored interval funds have garnered $4.9 billion of the $11.3 billion in total fundraised year-to-date, or 43% of total sales, Stanger said.
“We think the RIA community has become very organized,” said Cliffwater CEO Steven L. Nesbitt. Wealth Management “You don’t sell them things, you build partnerships and long-term relationships with them,” he said in a recent interview. “Wire companies and some banks just sell you something and take your money. RIAs are a whole different breed, they’re more institutional and they build long-term relationships with their clients. We have to do the same.”
Besides Cliff Water, Stanger noted that infrastructure interval funds were also gaining some support in the market.
“Total sales so far this year have exceeded $144 million with minimal redemptions of less than $1 million through May,” Gannon said. “Stanger expects to see continued growth in assets under management (AUM) and new market participants for these funds.”
There are currently five infrastructure-based interval funds with combined net assets of $3.2 billion, according to Stanger.
