The unlisted closed-end fund structure—primarily interval funds and tender-offer funds—allows asset managers to access the mass affluent market while addressing the liquidity challenges of alternatives and illiquid securities. Nearly 80 products have been launched during the last four years and another 47 sit in registration. UMB partnered with FUSE Research Network to publish a market update as of the second quarter of 2021, with insights into top investment categories, strategies, pricing and top asset managers.

UCEFs Report Access Graphic

The future of the unlisted closed-end fund space continues to look bright, with strong asset growth expected. Since 2017, annual growth has been in the double-digits. Asset growth in the first half of 2021 outpaced that of active exchange traded funds (ETFs) and mutual funds. As of June 2021, 138 unlisted closed-end funds were available for purchase by investors regardless of accreditation status, with total assets under management (AUM) reaching nearly $85 billion.

The data covered in UMB’s report includes interval funds and tender-offer funds, which are continuously offered registered closed-end funds that provide periodic liquidity to investors. They are primarily differentiated by the structure of repurchase offers. These structures allow asset managers to package complex strategies and access low liquidity asset classes, which cannot be handled by traditional packages.

One of the largest obstacles to distributing these funds successfully is providing adequate training and education to advisors. The audiences of unlisted closed-end funds vary from accredited to retail investors, so suitability and risk tolerances play important roles in the sale of these types of investments.

Key findings from the unlisted closed-end fund report

  • Interval funds continue to be the preferred structure for unlisted closed-end funds. Their market share of funds has grown every year since 2014 and peaked at year-end 2020, with a market share of 54.8%.
  • However, tender-offer funds have grown faster during the first six months of 2021 (18.6% versus 10.4% for interval funds), which resulted in a modest market share gain. This is a near-term trend we will be following over the coming quarters.
  • Strategies focused on accredited investors continue to account for the majority of unlisted closed-end fund assets, with a market share of 66%. High minimums strategies (>$100K) account for an additional 19% of unlisted closed-end fund assets.
  • Credit strategies have accounted for 59% of product launches since year-end 2016.
  • The unlisted closed-end fund space is a nascent business; however, growth rates have been excellent in recent periods. The space has grown at an annual rate of 14.8% since year-end 2014. In addition, annual growth has been in double digits in each of the last four years. Assets have grown 14% during the first half of 2021, which puts the industry on pace to outperform its strongest growth year in 2019 when assets under management (AUM) rose by 22%.

Access the full unlisted closed-end fund report for details on firms active in the space, including a manager profile.

Learn more about UMB Fund Services and how we can support your firm’s registered and alternative investment fund administration needs, or contact us to be connected with a fund services team member.