The interval fund ended the period with no borrowings outstanding even as its joint-venture securitization stakes climbed to nearly a fifth of net assets.

July 9, 2026

Axonic’s alternative income interval fund pushed past the $450 million mark in the first half of its fiscal year, as heavy inflows into its institutional share class and returns that far outpaced the investment-grade bond market extended a multi-year growth run for the commercial real estate credit strategy.

The Axonic Alternative Income Fund reported net assets of $450.9 million as of April 30, 2026, up from $386.0 million at its October 31, 2025 fiscal year-end. Nearly all of that expansion came from new capital: net share transactions added $75.2 million during the six-month stretch, led by $64.4 million in Class I sales alongside $17.6 million in Class A sales. The pace continues a striking trajectory for a vehicle that began the prior fiscal year with roughly $257 million in net assets.

Managed by New York-based Axonic Capital, the fund invests predominantly in commercial real estate structured credit. At period end, the portfolio broke down as follows:

• Commercial mortgage-backed securities: 45.62 percent of net assets
• Investments in joint ventures: 18.69 percent
• Loans: 17.59 percent
• Residential mortgage-backed and asset-backed securities: 4.85 percent combined
• Cash, equivalents and other net assets: 11.46 percent

The book remains concentrated by interval fund standards, with the ten largest positions accounting for 45.36 percent of net assets.

Returns Outrun the Benchmark

Class I shares returned 4.58 percent at net asset value over the six months and 9.78 percent over the trailing year, against 0.54 percent and 4.06 percent, respectively, for the Bloomberg U.S. Aggregate Bond Index. Three-year annualized performance stood at 11.08 percent for the institutional class, with 8.22 percent over five years. Class A shares returned 4.23 percent for the half-year without sales load.

The income engine behind those figures remained robust. The fund generated $30.0 million in total investment income, including $4.3 million of interest from affiliated positions, against $4.4 million of total expenses, producing $25.6 million in net investment income. Markdowns tempered the result: a $10.1 million net change in unrealized depreciation offset a $3.2 million net realized gain, leaving an $18.7 million net increase in net assets from operations.

Distributions ran ahead of that operating result. The fund paid out $29.0 million to shareholders during the period, exceeding the increase from operations by roughly $10 million and continuing a pattern from the prior fiscal year, when distributions of $28.9 million accompanied a $32.6 million operating gain. On a tax basis, the portfolio carried $14.0 million of net unrealized depreciation at period end.

Joint Ventures Anchor the Growth Story

A defining feature of the portfolio remains its trio of GSF-branded joint ventures, formed to acquire and hold interests in securitizations collateralized by third-party-originated commercial mortgage loans. The fund holds passive stakes through wholly owned special purpose vehicles, with an unaffiliated partner controlling half the voting interest in each vehicle. GSF 2023-1 Investor is the fund’s single largest position at 8.71 percent of net assets, with GSF 2025-AXMF1 EFX and GSF 2025-5 Portfolio Holding at 5.32 percent and 4.66 percent. The joint venture bucket, valued at $84.3 million, is classified as restricted and illiquid in its entirety, and the affiliated sleeve is carried at Level 3 under the fair value hierarchy.

Rule 144A securities add another layer of limited liquidity, totaling $150.1 million or 33.30 percent of net assets. For a strategy built around structured credit, the mix is consistent with the fund’s positioning as a long-term allocation, though it underscores the importance of the interval structure’s measured liquidity windows.

An Unlevered Balance Sheet at Period End

Notably for a credit vehicle with multiple financing channels, the fund closed the period with no borrowings outstanding. Reverse repurchase agreements averaged $17.2 million during the half-year at a weighted average rate of 5.08 percent, but none remained open at April 30. The fund’s $100 million commercial real estate warehouse facility with UBS, established in 2023 to finance floating-rate senior commercial mortgage loans, carried no balance, down from $12.2 million drawn at the prior fiscal year-end. A $30 million uncommitted revolving line with U.S. Bank, in place for redemption purposes, also went untapped.

Shareholder liquidity demands stayed manageable. In quarterly repurchase offers priced in December and March, the fund bought back a combined $21.9 million of shares across both classes, well within its inflow pace. A subsequent offer completed on June 16, 2026 retired 465,545 shares for $9.3 million. Class I net asset value stood at $20.05 per share at period end, with Class A at $19.74.

Board Renews Advisory Deal on Mixed Peer Comparison

The fund’s trustees, meeting in December 2025, unanimously renewed the advisory agreement with Axonic Capital for another year. The board weighed performance that lagged a third-party peer group over the trailing three years but outpaced peers over the one-, two-, four- and five-year periods ended September 30, 2025, and noted the fund had beaten its benchmark in each of the one- through five-year windows. The adviser collects a management fee of 1.25 percent of average daily net assets, which produced $2.6 million in advisory fees for the half-year, and has committed to cap operating expenses at 2.00 percent of average daily net assets through February 2027.

Expense ratios remained elevated relative to traditional bond funds, a familiar trade-off in the leverage-capable interval fund category. Class A shares carried a 2.79 percent annualized expense ratio including interest costs, with the institutional class at 2.09 percent. Portfolio turnover ran at 56 percent for the six months.

One structural note stands out for advisers monitoring the vehicle: National Financial Services held 41.76 percent of outstanding shares as of April 30, primarily through omnibus accounts — a concentration level that creates a presumption of control under the Investment Company Act and means large platform-level transactions could meaningfully affect share classes.

With inflows still running well ahead of redemptions, an unlevered balance sheet heading into the second half, and dry powder across three financing facilities, the fund enters the back half of fiscal 2026 with considerable flexibility to add commercial real estate credit exposure at a moment when much of the market remains in repair.