Unlisted closed end funds are a rapidly growing investment niche.  Why is there so much interest in this structure?  There are five fundamental benefits to unlisted closed end funds. 

Investor Access

Alternative investments play an important role in portfolio construction by providing diversification, reducing volatility, and enhancing long term returns. However, traditionally many of the best alternative managers have only been available to institutions and family offices. Alternative investments usually have high investment minimums, high investor accreditation requirements, complicated tax forms, and limited liquidity. However unlisted investments make alternative investments available to a broader audience.

Many unlisted closed end funds allow retail investors to start investing with as little as $500. Unlike private placements, investors receive simple 1099 tax filings. Furthermore, unlisted closed end funds offer better liquidity than private placements.

Continuous Capital Raise

Being able to continuously raise capital at NAV across market cycles is an under discussed advantage of unlisted funds. Traded closed end funds typically conduct an initial IPO, then must quickly invest all their money, regardless of market conditions. Subsequently they might not be able to raise capital. Often when opportunities are best, closed end funds trade at a discount to NAV, meaning a traded fund cannot raise capital without diluting existing investors. Consequently traded funds are hostage to the initial timing of their IPO.

In contrast unlisted closed end funds conduct a continuous capital raise over many years. This allows them to continuously add investments across a cycle. Additionally, if they have a good distribution network, and investor base, they will often have access to capital at the bottom of the cycle when assets are cheapest. The unlisted structure offers greater flexibility.

Long Term Emphasis

Without the pressure of a quoted stock price, the manager of an unlisted closed end fund can focus on long term opportunities without worrying about short term market perception. Aa a result, an unlisted structure is a better fit for more lucrative alternative strategies.

Emotional Management

Retail investors have a reputation for buying at market tops selling at market bottoms. Consequently the average investor return in a mutual fund is far lower than the actual return achieved by a mutual fund. Although unlisted funds offer some liquidity options(typically quarterly), the extra stop gap helps investors better manage emotions. This is also valuable for financial advisers trying to encourage prudent behaviour in their clients. With unlisted closed end funds, investors are more likely to achieve the best possible returns from holding any given fund over a market cycle.

Transparency

Alternative investments have a reputation for opacity. If you invest in a private equity fund or hedge fund, often you are unable to see specific details on underlying investments. However all unlisted closed end funds are registered under the 1940 act, and consequently must provide regular updates in SEC filings. On a semi annual basis, unlisted closed end funds file detailed financial statements. On a quarterly basis, they must file detailed lists of individual portfolio holdings. Recent regulatory changes have increased the frequency and usefulness of unlisted closed end fund disclosures.

Although unlisted closed end funds make detailed information available in regulatory filings, these filings are not in a user friendly format. Ockham Data Group is dedicated to making public data on alternative investments easier to access and use.

Unlisted closed end funds come in two flavors.: Interval funds and tender offer funds. Interval funds have a fundamental policy requiring periodic tender offers at fixed intervals. More details can be found on our affiliate site, Interval Fund Tracker. Tender offer funds are similar, but have a wider variety of liquidity provisions. For a list of active tender offer funds, please see the tools and data section section of this site.