Unlisted closed-end funds (CEFs) have maintained their momentum even after several years of significant growth, surpassing $100 billion in assets under management (AUM) in 2022, an all-time record for the category, which is made up of interval funds and tender-offer funds.

Not surprisingly after colossal new-product growth in 2021, assets raised by new products slowed in 2022, which is shown in our latest research, compiled in partnership with FUSE Research Network.

The research indicates that the market for unlisted CEFs is beginning to show signs of maturation, but this set of fund structures continues to exhibit the potential for continued growth in assets.

Key findings: 2022 analysis of interval funds and tender-offer funds

Unlisted CEFs offer a way for investors to access a broad set of alternative investment strategies to enhance their risk-adjusted returns with low correlation to traditional asset classes while still retaining a satisfactory level of liquidity and simplicity.

Investors choose these funds today with the same goals, but now they enjoy the added benefit of a larger number of funds to choose from and longer track records with which fund performance can be evaluated.

In that context, the 2022 analysis found:

  1. There is no shortage of successful new product launches, with at least 10 new funds reaching $300 million or more in their initial asset-raise.
  2. New product development continues, but the pace of new fund launches may have slowed slightly since last year, suggesting fund sponsors may have turned their attention to reaching scale with their current product lineup.
  3. Interval funds have pulled ahead of tender-offer funds in terms of both assets and number of funds due to a combination of distribution strategies driving investors into those funds and the attractiveness of the asset classes/investment strategies in the current market environment.Interval Funds 2Tender offer funds
  4. Since historically low interest rates had contributed to the recent success of unlisted CEFs, a rising rate environment could change the ability for some of these strategies to generate alpha or attract flows.
  5. Investment advisers continue to earn attractive management fees and may be incentivized with performance fees that can rival those earned in their highest-margin institutional products.
  6. The private wealth channel continues to exhibit demand for unlisted CEFs as these funds offer a unique combination of sophisticated strategies, low-correlation investments, reasonable minimums, and palatable liquidity.

Research focus areas

Read the full report for quantitative and qualitative information on:

  • Moderated acceleration in asset growth
  • Interval fund growth outpacing tender-offer fund growth
  • Target investors by accreditation status and minimums
  • Product launches
  • The rise of credit funds as a proportion of all interval funds—now nearly half
  • Fees, including incentives
  • Operating expenses
  • Top 10 largest funds by AUM
  • Top 10 largest firms by AUM

Comments from UMB experts

Accompanying the research, UMB’s interval and tender-offer fund administration experts answer the questions we receive most often on this product structure, including:

  • How do interval and tender-offer funds differ?
  • What’s the purchase and redemption process for interval vs. tender-offer funds?
  • Are these ’40 Act requirements really necessary?
  • What do we need to think about up front regarding distribution?
  • What are the basic paths for private managers getting started with registered funds?

Access the report, The Next Stage of Growth for Unlisted Closed-End Funds

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