Interval funds have reached a combined aggregate net asset value of $86.4 billion through the first six months of 2024, an increase of $10.9% from the end of the first quarter, according to new data from Robert A. Stanger & Co.
That data roughly aligns with Morningstar’s 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 up to 5% per quarter, were also a hot topic at Morningstar’s recent investor conference.)
Meanwhile, XA Investments’ most recent monthly update on the non-listed closed-end fund market (which monitors both interval funds and tender offer funds) pegged the current total at 110 interval funds with $101.6 billion in total managed assets.
Based on XA Investment’s research, there are 230 effective interval and tender offer funds as of June 30 with a combined $150 billion in net assets. Additionally, XA is forecasting that total to reach 235 to 255 funds by the end of the year with $160 billion to $175 billion in forecast net assets.
“In 2023, the interval fund market was hurt by outflows from real estate-focused funds,” said XA Investments President Kimberly Flynn. “While proration trends for real estate funds have continued in 2024, we have seen continued growth from the interval fund market's credit and private equity segments. We observe 50 funds currently in the SEC registration process.”
The Pace of Launches
According to Stanger, nine new interval funds became effective during the quarter, and 11 more filed registration statements. Overall, there are nearly 40 new interval funds with pending registrations.
A recent survey by Cerulli Associates found that alternative asset managers are extremely bullish on the interval fund structure as a distribution opportunity. Overall, 54% of surveyed asset managers said they are using the interval fund structure, while 76% said they saw it as a “large opportunity,” outpacing 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.
"Following a robust beginning to the year, we anticipate interval funds will achieve capital formation totaling $27 billion in 2024, a 35% increase from the $20 billion raised in 2023,” Stanger Chairman and CEO Kevin T. Gannon said in a statement.
Overall, according to Stanger, 28 interval 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, commands nearly one-quarter of all interval fund assets. In 2024 alone, Cliffwater-sponsored interval funds have amassed $4.9 billion of the $11.3 billion in gross-year-to-date fundraising—43% of gross sales, according to Stanger.
“We believe the RIA community has become very institutional,” Cliffwater CEO Stephen L. Nesbitt told WealthManagement.com in a recent interview. “You don’t sell to them; you have to establish a partnership or long-term relationship with them, unlike the wires or some of the banks, where they are just trying to get paid to sell something. RIAs are a different ilk and more institutional-like, where they establish a long-term relationship with their clients. We have to do the same thing.”
Aside from Cliffwater, Stanger pointed to infrastructure interval funds gaining some traction in the marketplace.
“Year-to-date gross sales have exceeded $144 million, with minimal redemptions of less than $1 million through May,” Gannon said. “Stanger anticipates ongoing expansion in 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.