Interval Funds Rushing to Fill the Void
While capital raising among non-traded REITs and BDCs continue to falter as the direct investment industry adjusts to FINRA 15-02, the Department of Labor’s fiduciary rule and the fallout resulting from the various American Realty Capital scandals, the buzz surrounding interval funds continues to grow as the emerging investment class gains footing in the marketplace. Today, an interval fund sponsored by Griffin Capital Corp., Griffin Institutional Access Real Estate Fund (NASDAQ: GIREX, GCREX, GRIFX), announced that it has exceeded $1 billion in assets under management – a milestone it reached in a little over two years since its launch on June 30, 2014.
But Griffin isn’t the only player to enjoy success in interval fund space. Bluerock’s Total Income+ Real Estate Fund launched in September 2012 and has $402.5 million in total assets, according to their latest filing with the SEC. Resource Real Estate Diversified Income Fund, which launched in March 2013, has $112.2 million in assets under management. Versus Capital Multi-Manager Real Estate Income Fund, which offers class I and class F shares, went effective in December 2011 and currently has $969.2 million in assets under management.
Interval funds invest in the same types of alternative assets one would find in a non-traded REIT, and offer multiple share classes so that financial advisors can invest on behalf of their clients on either a fee basis or a brokerage basis.
An interval fund “enables individual investors to participate in institutional real estate investments,” said Randy Anderson, portfolio manager, Griffin Institutional Access Real Estate Fund. “In today’s volatile market environment, the pressing need for individual investors to find strong risk-adjusted returns is more imperative than ever.”
It is no secret that Griffin CEO Kevin Shields is a fan of the interval fund structure. Earlier this year, a business development company that Griffin co-sponsors with Benefit Street Partners announced that it was closing and would likely merge into an interval fund should stockholders approve. Despite the success of GIREX, Griffin said that it believes that interval funds are ideally an added option to non-traded REITs, versus a replacement vehicle.
Interval funds have notable benefits that the investor community appear to be embracing, including lower fees, greater net asset value transparency, and enhanced liquidity. At regular intervals, usually quarterly, these funds are required to offer shareholders redemptions of at least 5 percent so investors can liquidate their shares if they so choose.
GIREX makes quarterly offers to repurchase between 5 percent and 25 percent of its outstanding shares at net asset value. The fund requires a minimum investment of $2,500 for regular accounts and $1,000 for retirement plan accounts. The fund began reporting on NASDAQ on June 30, 2014 with an initial share price of $25.00 and reported a share price of $26.83 for class A, $26.62 for class C, and $26.90 for class I, as of September 14, 2016.
Other players in the interval fund space include Willdermuth Advisory’s Wildermuth Endowment Strategy Fund, Provasi Capital Partners’ Vertical Capital Income Fund, and SP Investments’ Sharepost 100 Fund. And sponsors continue to enter the interval fund space—Resource Real Estate launched their second fund, Resource Credit Income Fund, last year, while Highland Capital Management launched NexPoint Real Estate Strategies Fund two months ago.
Interval funds are expected to increase in popularity in the alternative investment space as retail investors seek out new investments that offer both income and long term capital appreciation, but are not tied to traditional asset classes.
