The Next Evolution in Credit Products

The latest issue of Private Debt Investor includes an excellent article on interval funds in the broader context of credit products for investors.   The article cites data from Interval Fund Tracker, and includes interviews with several interval fund managers. It notes that interval funds are able to provide enhanced  yield while providing quarterly liquidity.   Additionally, the article discusses the role of credit interval funds in asset allocation.

According to Brook Taube at Medley Management(manager of Sierra Total Return Fund):

Access to private credit can help satisfy investors’ demand for yield. The fact that the [interval] fund offers liquidity on a quarterly basis makes it an attractive structure for retail investors.

According to Michael Reisner, co-chairman and co-chief executive at CION(manager of the Cion Ares Diversified Credit Fund):

If you look at BDCs as sector-specific products – eg, US mid-market – credit interval funds like ours are more diversified and a core holding, and should be the next evolution in credit products.

According to Marc Yaklofsky, senior vice-president and spokesman at FS Investments(manager of the FS Total Return Fund):

In a low growth and low interest rate environment, with equity fully valued or potentially over-valued, the traditional 60 percent equities and 40 percent bonds portfolio allocation is the BlackBerry of portfolio construction.

The Continued Rise of Credit Funds

Credit strategies account for 22% of interval fund AUM as of the date of this post. However, several notable credit funds have just begun raising capital, including, Cion Ares Diversified Credit Fund , FS Energy Total Return Fund, Griffin Institutional Access Global Credit Fund , PIMCO Flexible Credit Income Fund. These funds will likely impact AUM stats later this year. Further, the pipeline of funds in registration indicates that credit funds are growing in importance.

See Tools and Data for additional information.

For fee information on new credit products, see: Comparing the New Credit Funds.