RiverPark Floating Rate CMBS Fund - (RCRIX)

Dave

Anyone have any experience and/or thoughts on this fairly new (September 2016) RiverPark fund. It is not managed by Cohanzick Management (David Sherman) of the Riverpark High Yield (RPHYX/RPHIX) & Strategic Income (RSIVX/RSIIX) funds, and there's no real history but it looks interesting as a commercial real estate mortgage play with a yield based on the monthly LIBOR rate resets. Mr. Snowball posted a Launch Alert back in October but I see nothing else in the archives.

The main drawback I see to this fund (other than its being an MBS) is its structure as a closed-end "interval" fund and a limitation of only being able to redeem (sell) shares on a quarterly basis. In all probability, the 5-25% of outstanding shares quarterly repurchase limitation would never (probably never?) be invoked, but it is a consideration limiting ones personal liquidity.

Other comments?

/dave

Junkster

Interval funds = another gimmick/fad offered to retails investors under the guise they are being being offered the privilege to invest along side of the big boys. But maybe I am getting old and just can't grasp why anyone in their right mind would invest in a fund where access to your monies is limited. Regardless, not being a fan of anything Riverpark related, you might want to check out the new credit interval fund from PIMCO - PFLEX - which so far is nicely outperforming the offering from Riverpark. Of course, there are a 1001 fine open end credit funds out there that are outperforming so why even look at a credit interval fund? Unless of course you believe the hype of how they will protect you in the the next meltdown - a meltdown they have yet to even be tested in.

LewisBraham

@Dave @Junkster I have no problem with the interval structure as I think it is the most appropriate one for illiquid assets that can be hard to trade. There is an "illiquidity premium" for such assets and they tend to produce better returns long term, but only if you have the stomach to hold them and not be forced to sell them at distressed prices. So an interval structure may be the most appropriate to prevent forced selling.

That said, the fund industry has terrible timing when it comes to launching new products, tending to open new funds when an asset class is hot and may have peaked already and close funds when an asset class is bottoming and will rebound soon. It is possible this may be the case with CMBS and Riverpark as there are indications that CMBS are overvalued:
businessinsider.com/11-trillion-commercial-real-estate-bubble-ready-to-rock-the-economy-2016-11

There is also a case to be made that companies like Amazon may ultimately destroy significant parts of the retail sector, which will hurt CMBS with leases on malls and other retail-oriented buildings. So I find the timing of this fund launch suspect.

carew388

IIRC, one of the attractions of interval funds is the ability to take meaningful(sizable) positions in illiquid securities. You have to ensure that you're comfortable with those risks, IMHO.

VintageFreak

My prediction - Cohanzick will take his funds private and Riverpark will collapse in the next bear market.

msf

Interval funds are nothing new - they've been around for decades, but they seem to have reached more widespread awareness (including the relatively new term "interval funds") in the past few years.

Here's a page from CEFadvisors.com, with no date, but google says that the page comes from Sept. 25, 2004: "Some closed-end funds are excessively concerned with the discount. Many CEFs have successfully reduced their discount and enhanced performance by a combination of share repurchases and/or periodic tender offers at or near NAV."

My impression is that this accurately states where the idea of periodic redemptions came from - CEF trading at too high a discount. Periodic redemptions, as contasted with no redemptions (just market trading) would tend to keep them closer to NAV, somewhat like ETFs.

A couple of decades ago, fund sponsors took a stab at offering stable value funds outside of the 401k arena. These funds came to the interval fund structure from the other end of the spectrum - trying to mimic open end funds (daily redemptions) while clamping down on trading, since stable value funds need long term money to work. Sponsors gradually converted these to open end funds (my guess is because people didn't "get" interval funds); that and tighter SEC scrutiny killed off the stable value funds.

The point is that there can be different reasons why a fund chooses to offer periodic redemptions. The boomlet in these funds now strikes me as marketing. Instead of simply starting these funds as CEFs and watching how their market discounts moved, they're being sold from the start as pseudo-open-end funds to garner a wider audience.