Haselkorn & Thibaut, P.A., operating as Investment Fraud Lawyers,
has heard from investors who bought into interval funds without
understanding the label — or what they could lose when the structure
changed. The Bluerock Total Income+ Real Estate Fund and its successor,
the Bluerock Private Real Estate Fund (BPRE), illustrate this interval
fund conversion risk.
What is an interval fund?
Table of Contents
An interval fund is a registered investment company regulated by the
Securities and Exchange Commission (SEC). Unlike mutual funds, which
allow daily redemptions, interval funds offer liquidity only through
periodic repurchase offers — typically quarterly. The fund decides how
many shares it repurchases each quarter. It is not obligated to honor
all requests.
The Financial Industry Regulatory Authority (FINRA) requires brokers who
recommend interval funds to conduct reasonable due diligence on
liquidity constraints, fee structure, and suitability. Those obligations
do not vanish when a fund changes its structure.
How interval funds work
Interval funds sit between daily-liquidity mutual funds and fully
illiquid private placements. Key features include quarterly repurchase
offers (not assured redemptions) and a repurchase limit often set at 5%
of net asset value per quarter. There is no secondary market between
windows, and pricing is based on NAV rather than market demand.
Investors in the Bluerock Total Income+ Real Estate Fund understood they
could request to sell shares back to the fund quarterly. When demand
exceeded the repurchase limit, requests were prorated, leaving some
investors unable to exit.
What happened with the Bluerock funds
Bluerock Real Estate, the fund’s sponsor, announced the fund would
convert from an interval fund into a closed-end fund listed on the New
York Stock Exchange (NYSE) under the ticker BPRE. The rebranded vehicle
became the Bluerock Private Real Estate Fund.
| Feature | As an interval fund | After closed-end conversion |
|---|---|---|
| Liquidity mechanism | Quarterly repurchase offers | NYSE market price (no repurchase offers) |
| Pricing | Net asset value (NAV) | Market price, often below NAV |
| Redemption assurance | Limited to 5% per quarter | None — sell on the open market |
| Discount risk | None (redeemed at NAV) | Significant — closed-end funds often trade at a discount |
Investors have alleged that the conversion eliminated NAV-based
repurchase offers and replaced them with market pricing. Closed-end
funds often trade below their net asset value, meaning investors
expecting to exit at NAV found their shares worth less than the
underlying real estate assets suggested.
Why the conversion created risk
Interval fund conversion risk appears in several ways. First, investors
who bought a product with quarterly NAV-based exits now held one priced
by market sentiment on the NYSE. The share price reflected supply and
demand, not just the value of the underlying holdings.
Second, the conversion removed the quarterly opportunity to redeem at a
known price. Investors in a closed-end fund bear the risk that market
discounts could widen during commercial real estate stress.
Third, brokers and advisors who recommended the original interval fund
may not have adequately disclosed the risks of a future conversion.
Investors who would not have purchased a closed-end real estate fund
found themselves holding one without affirmatively consenting to the
change.
FINRA and SEC obligations
FINRA Rule 2111 requires brokers to have a reasonable basis for
believing a recommendation suits a particular customer. When a product’s
structure changes as dramatically as an interval-to-closed-end
conversion, brokers have an ongoing duty to reassess suitability.
The SEC has emphasized that funds must provide clear disclosure of
material changes, including structural conversions. Investors have
alleged that disclosures around the Bluerock conversion did not
adequately explain the shift from NAV-based redemptions to market
pricing.
For investors who suffered
Bluerock
Private Real Estate Fund losses, these suitability and disclosure
failures may form the basis of a FINRA arbitration claim.
What investors can do
-
Gather purchase confirmations, account statements, and offering
documents from both the interval and closed-end periods -
Document any communications from your broker regarding the conversion or
expected liquidity -
Request your broker’s CRD number and check their FINRA BrokerCheck
record -
Consult a securities attorney experienced in FINRA arbitration before
the statute of limitations expires
How we can help
Our attorneys include former Wall Street defense counsel who spent
decades representing the largest financial institutions. We now use that
insider knowledge to fight for individual investors. Haselkorn &
Thibaut, P.A. operates on a contingency-fee basis: no recovery, no fee.
Call 1-888-885-7162 or visit InvestmentFraudLawyers.com for a
confidential consultation.
Frequently asked questions
What is an interval fund?
An interval fund offers quarterly repurchase offers rather than daily
redemptions. The fund repurchases a limited percentage of shares each
quarter — typically 5% of NAV — and can prorate excess requests.
Why did Bluerock convert from an interval fund to a closed-end
fund?
Bluerock Real Estate sponsored the conversion of the Bluerock Total
Income+ Real Estate Fund into BPRE, a closed-end fund on the NYSE.
Investors have alleged the conversion eliminated quarterly NAV-based
repurchase offers and replaced them with market pricing that resulted in
losses.
What is interval fund conversion risk?
It is the danger that a fund will change from an interval fund to a
closed-end fund, reducing liquidity, introducing market-pricing
discounts, and altering the risk profile investors agreed to.
Can I recover losses from the Bluerock fund conversion?
Investors who suffered losses may have grounds for a FINRA arbitration
claim based on unsuitability, inadequate disclosure, or breach of
fiduciary duty. Consult a securities attorney. Call 1-888-885-7162 or
visit InvestmentFraudLawyers.com.
Disclaimer: Past results do not guarantee future outcomes. This page
provides general information and is not legal advice. No attorney-client
relationship is formed by reading this content.
There is no assured recovery in any securities matter. Consult a
qualified attorney regarding your specific situation.
