Nontraded

Nontraded refers to assets or securities that are not listed on public exchanges or actively traded in a secondary market. In finance, the term is commonly applied to investments sold through private placements or that only become tradable at later liquidity events. Nontraded vehicles include non-traded real estate investment trusts (REITs), non-traded business development companies (BDCs), and certain non-listed funds.

How nontraded investments operate varies by type, but several common features apply. They are typically registered with securities regulators but do not have a listing on a stock or bond exchange. Capital is raised through brokers or sponsor networks, and the investment is valued periodically by independent appraisers rather than through public market pricing. Liquidity is limited: investors can usually redeem only at set intervals or upon specified liquidity events, and redemptions may be subject to caps, fees, or wait periods. Fees can be higher than those for publicly traded securities and may include sales charges, ongoing management fees, and potential dilution.

Examples include non-traded REITs, which invest in real estate portfolios and seek liquidity through occasional redemptions or eventual public listing; non-traded BDCs, which invest in private companies; and certain non-listed funds that do not trade on exchanges.

Advantages of nontraded investments can include access to specialized asset classes, potential diversification benefits, and professional management. Disadvantages commonly include illiquidity, higher and more complex fee structures, valuation uncertainty, and greater reliance on sponsor track records. Investors should carefully review offering documents, risk factors, and liquidity terms, and consider how nontraded investments fit their time horizon and risk tolerance.