If there is one universal truth about the investment management industry, it is its unique capacity for constant innovation. Today, it seems as if alternative assets of one type or another are the next frontier. Tremendous progress is being made as a wide variety of so-called semi-liquid products, such as interval funds, non-traded REITs and non-traded BDCs, are increasingly available to investors who meet accredited investor or suitability standards. These products offer investors exposure to assets that, until recently, were out of reach to all but the wealthiest and most sophisticated investors, including private real estate and credit. And, because they are less liquid than publicly traded vehicles, their prices tend to be more stable and less subject to market fluctuations.
In fact, in a recent survey conducted by SS&C Research, Analytics and Consulting, due diligence teams from a variety of wealth managers (wirehouses, independent and regional broker-dealers, private banks and TAMPs) indicated that they saw tremendous potential for asset raising in the medium-term future. Perhaps unsurprisingly, this is reflected in the number of funds being registered and launched. For example, according to XA Investments, April was an active month for new interval fund registrations. Five funds filed new interval fund registrations with the SEC, including Polen Capital Credit (which is entering the market for the first time) and PIMCO (which filed for its sixth interval fund). In 2022, 25 new interval funds completed the SEC registration process and launched.
Of course, how investment managers can benefit from the growth of these products is very much on the minds of industry strategists. In fact, our research with wealth managers’ due diligence teams indicates that specialist alternative managers have a significant lane for growth.
Ultimately, illiquid alternatives, such as interval funds and non-traded REITs and BDCs, are powerful investment instruments, which in the hands of a skilled financial advisor can hedge downside risk and limit volatility. We firmly believe that alternative investment strategies will experience continued growth in the coming years. As a leading provider of business intelligence tools, such as WalletShare for Alternatives, SS&C works with some of the largest traditional and alternative investment managers. Our team can help asset managers target the best opportunities and optimize their distribution efforts. To learn more, read about our WalletShare analytics service and our consulting capabilities.