New Gladstone Interval Fund to Invest 85% Debt, 15% Equity Securities
Gladstone Alternative Income Fund – a non-diversified closed-end investment company operating as an interval fund – was declared effective by the U.S. Securities and Exchange Commission last week. For now, it will continuously offer common Class A, Class C, Class I and Class U shares, and may offer additional classes of shares in the future.
Its investment adviser is Gladstone Management Corporation.
Summarized in the prospectus, the fund said it will primarily invest in debt securities of established businesses or real estate holding intermediaries that it believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its debt, and make distributions to shareholders that grow over time. It will also aim to provide shareholders with long-term capital appreciation by investing in equity securities of established businesses, including in connection with our debt investments, that it believes can grow over time and permit it to sell its equity investments for capital gains.
To achieve its investment objective, according to the fund, it will primarily make loans to lower- and middle-market private businesses in the United States, as well as investing in broad syndicated loans and commercial real estate loans. Investments in a particular portfolio will generally range from $1 million to $30 million; the company expects its portfolio to be approximately 85% in debt securities and 15% in equity securities.
It said it seeks to avoid investing in high-risk, pre-revenue, early-stage enterprises. Although it anticipates its majority of debt securities to not be rated by an agency, the fund said investors should assume that the loans, if rated, would be considered “investment grade” quality and, thus, not high-yield securities or junk bonds.
According to filings, the fund has also received exemptive relief to co-invest alongside two business development companies: Gladstone Capital Corporation (Nasdaq: GLAD) and Gladstone Investment Corporation (Nasdaq: GAIN), which are managed by subsidiaries of Gladstone Management Corporation.
To provide liquidity to shareholders, the fund will make quarterly offers to repurchase between 5% and 25% of its outstanding shares at net asset value per share, reduced by any applicable repurchase fee.
The maximum sales load is 5.75% of the amount invested for Class A shares, while Class I, Class C, and Class U shares are not subject to front-end sales loads. The minimum initial investment in Class I Shares, Class A Shares, Class C Shares and Class U Shares by any investor is $250,000, $5,000, $5,000 and $5,000, respectively, per account.
The fund stated that it reserved the right to waive the minimum initial investment requirement for any investor, and that shares are being offered initially through Gladstone Securities LLC, an affiliate of Gladstone Management Corporation, on a best-efforts basis.
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