UMB Fund Services, an affiliate of financial services firm UMB Financial Corporation (Nasdaq: UMBF), has released its third annual report on unlisted closed-end funds, which include interval and tender offer funds. The size of the unlisted closed-end fund market has grown steadily since 2014, ending 2018 at nearly $53 billion in assets under management.
Interval funds and tender-offer funds are continuously offered registered closed-end funds that provide periodic liquidity to investors. According to the report, titled Unlisted Closed-End Funds: Market Update Amid Building Momentum, interval funds continue to outpace tender offer funds from an asset growth perspective.
The report states that, since 2014, interval funds have grown at an annual rate of 42.9 percent to end 2018 with $27.2 billion in assets. During this period, tender offer funds dropped to $25.6 billion with a compound annual growth rate of -2.1 percent. In 2014, interval funds represented only 19 percent of the unlisted closed-end fund marketplace, increasing to 51.5 percent as of year-end 2018.
“After servicing these products for more than 20 years, it is exciting to see interval funds not only growing in number of funds, but also in asset size as we see more acceptance and stronger interest from financial advisors,” said Terry Gallagher, executive vice president and director of fund accounting and administration at UMB Fund Services.
Although assets in the two structures are nearly even, the report states, asset growth for interval funds during the past five years has been significant. In 2014, assets in interval funds were $6.5 billion, while tender-offer funds were nearly $28 billion—showing the dramatic growth with interval fund assets and the retraction from tender-offer funds seen today.
According to the report, Stone Ridge Reinsurance Risk Premium Interval Fund ranked as the largest fund with $5.3 billion in assets as of year-end 2018. However, Griffin Institutional Access Real Estate Fund, with $2.8 billion in assets, experienced the highest compound annual growth rate. Skybridge Multi Adviser Hedge Fund Portfolios, a tender-offer fund, was the only fund among the list to suffer a negative growth rate since 2014.
Key elements of the study include number of funds and assets, top funds and firms, market update and outlook, insight into advisor use and manager spotlight. The research was conducted by FUSE Research Network (FUSE).
FUSE anticipates the growth of unlisted closed-end funds to continue in 2019, but at a slower pace than 2018, with interval funds as the key driver of that growth.
UMB Fund Services, headquartered in Milwaukee, Wisconsin, offers a line of products and services to the fund industry, including fund administration, fund accounting, tax, investor services and transfer agency, distribution, and custody.