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Reduced liquidity of interval funds

On Behalf of | Nov 11, 2016 | Uncategorized

Interval funds have become increasingly popular in recent years largely because they allow individual investors access to highly-rated and much-coveted real estate credit and equity investments. Private real estate equity and private and commercial real estate debt offer secure and healthy returns, but investors in Missouri and around the country should consider their liquidity requirements carefully before using interval funds to gain entry to these markets.

Mutual fund and real estate investment trust managers must meet daily liquidity requirements, and this greatly restricts the kind of assets they can offer. Interval funds generally allow only a single redemption each quarter, so their managers are free to pursue returns more aggressively without worrying too much about liquidity. Lenders tend to charge higher rates on long-term real estate loans, and interval funds allow investors willing to take a strategic approach access to these valuable assets.

Interval funds may also provide investors with a hedge against market volatility. The prices of assets like commercial property and real estate debt are generally able to weather short periods of financial uncertainty, and investors who are not able to pull their money out quickly may be less likely to overreact to unexpected economic developments.

Commercial real estate investments that seem attractive at first glance can sometimes turn into rapacious money pits, and attorneys with experience in this area may be able to identify potential problems and suggest ways to deal with them. Attorneys could suggest that proactive strategies be adopted to address the realities of changing demographics and consumer behavior patterns and the costs of retrofitting older buildings to meet environmental regulations that are likely to become far stricter in the years ahead. Attorneys could also help investors by assessing the property and asset portfolios of real estate investment trusts and interval funds.