Access to Private Real Estate in a Publicly-Traded Index Fund

Many investment advisors have steered clear of private real estate investments for their clients over the years, often because of concerns over illiquidity, cumbersome subscription processes, limited transparency, and high fee structures. While all are valid reasons to remain cautious of the asset class, in many cases, advisors may have missed out on the benefits private real estate can bring to a client's portfolio.

Institutional investors have long been allocating to private real estate, often more than 10% of their investment portfolios. These sophisticated investors prefer the asset class because it is uncorrelated with publicly traded securities and, historically, has been: 

• A source of durable income
• A hedge against inflation
• A source of attractive returns

Recognizing how advisors and their clients could benefit from allocating to private real estate, asset management firms have increasingly turned to a new fund structure to help overcome long-held advisor objections.

Interval Funds to the Rescue

Interval funds are 40-act funds that have characteristics of open-end and closed-end funds. Interval fund investors can redeem shares at NAV during certain defined intervals yet offer their shares daily in a continuous offering. Since they offer some form of liquidity but are not required to redeem daily, interval funds can invest in less liquid private assets that may offer investors an illiquidity premium over many publicly traded securities.

For advisors reluctant to pursue traditional private offerings, the interval fund structure allows them to access private assets like real estate and easily reallocate their model portfolios since the funds are priced daily. Advisors’ clients can now benefit from the attractive characteristics of private real estate that institutional investors have enjoyed for years.

In addition, interval funds help to effectively overcome the issues of illiquidity, lengthy subscriptions, and poor transparency. But what about the concern over high fees?

An Index Approach Arrives

Private investment funds often have complex fee structures that include high management fees, hurdle rates, and back-end performance fees. Yet Accordant’s subadvisor, IDR Investment Management, developed an innovative index fund that helps address the high-fee issue many advisors have encountered with other private placement investments.

The Accordant ODCE Index Fund solves the complicated parts by enabling investors the ability to purchase the index fund through major platforms on a daily basis. The Accordant ODCE Index fund seeks to track the NFI-ODCE Index, an industry benchmark that has been used by institutional managers for years to monitor the performance of many premier real estate investment managers pursuing a core investment strategy. 

The Power of Innovation

We anticipate advisors will see dramatic growth in the interval fund space over the next few years as more asset managers develop innovative funds to make private assets more easily available to retail investors. And we expect to see sustained change in the traditional 60/40 stock and bond model portfolio as alternative assets increasingly play a larger role in portfolio diversification. 

Advisors who are early adopters of using interval funds to access private real estate have the opportunity to carve out a niche with clients and prospects that could prove to be a strong driver of growth in their firms.

If you’d like to learn more about how allocating to private real estate with the Accordant ODCE Index Fund could potentially benefit client portfolios, visit us here or schedule a consultation with us here.

Accordant Investments LLC (“Accordant”) is an SEC registered investment adviser. This presentation does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service managed by Accordant.

The Accordant ODCE Index Fund (the “Fund”) currently offers Class A Shares, Class I Shares and Class Y Shares which will all be continuously offered at the Fund’s net asset value (“NAV”) per share, plus, in the case of Class A Shares, a maximum sales load of up to 5.75%, from which a dealer-manager fee of up to 0.75% of offering proceeds may also be paid. Holders of Class A Shares, Class I Shares, and Class Y Shares have equal rights and privileges with each other, except that Class I Shares and Class Y Shares do not pay a sales load or dealer manager fees. See “Ongoing Distribution and Servicing Fees” and “Summary of Fund Expenses” for information on servicing and distribution fees in the Prospectus. Class I Shares and Class Y Shares are each not subject to a sales load; however investors could be required to pay brokerage commissions on purchases and sales of Class I or Class Y Shares to their selling agents. Inception date of the I shares is September 11, 2023 . Class A is November 1, 2023.

The Accordant ODCE Index Fund (the “Fund”) was previously registered as the IDR Core Property Index Fund, Ltd. (the “Predecessor Fund”).  The Fund’s investment adviser is Accordant Investments LLC (“Adviser”) and Fund’s sub-advised by IDR Investment Management LLC (“Sub-Adviser”). The Predecessor Fund was a quarterly valued closed-end tender offer fund only available to accredited investors. Pursuant to a proxy filed with SEC and a special shareholder meeting that occurred on August 31, 2023, the Predecessor Fund converted into the Fund, which is a daily valued registered closed-end interval fund (“Conversion”). The Predecessor Fund previously charged a management fee of 40bps while the Fund now charges 60bps. Fund performance shown in this presentation is net of fees and for performance prior to September 11, 2023 reflects a 40bps management fee and for performance on and after September 11, 2023 reflects a 60bps management fee. The performance shown reflects a continuation of performance from the Predecessor Fund to the Fund. While the Fund has different investment adviser than the Predecessor Fund, the Fund’s portfolio management is substantially similar to the Predecessor Fund.  The Conversion was a non-taxable event for existing shareholders. 

Past Performance is No Guarantee of Future Results.

Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. The Fund’s investment objective is to employ an indexing investment approach that seeks to track the NCREIF Fund Index – Open End Diversified Core Equity (the “NFI-ODCE Index”) on a net-of-fee basis while minimizing tracking error. can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns.  It is not possible to invest in an index. You cannot invest directly in an index and unmanaged indices do not reflect fees, expenses or sales charges.

The ability of the Fund to achieve its investment objective depends, in part, on the ability of the Advisor to allocate effectively the Fund’s assets across the various asset classes in which it invests and to select investments in each such asset class. There can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns. Limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers for no less than 5% of the Fund’s shares outstanding at net asset value. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer. The first repurchase offer following the Conversion is expected to occur in February 2024. 

An investment in the Fund represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The Fund is classified as “non-diversified” under the Investment Company Act of 1940 and therefore may invest more than 5% of its total assets in the securities of one or more issuers As such, changes in the financial condition or market value of a single issuer may cause a greater fluctuation in the Fund’s net asset value than in a “diversified” fund. The Fund is not intended to be a complete investment program.

The Fund is subject to the risk that geopolitical and other similar events will disrupt the economy on a national or global level. For instance, war, terrorism, market manipulation, government defaults, government shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental disasters can all negatively impact the securities markets. 

The current novel coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced or voluntary closure of, or operational changes to, many retail and other businesses, have had negative impacts, and in many cases severe negative impacts, on markets worldwide. Potential impacts on the real estate market may include lower occupancy rates, decreased lease payments, defaults and foreclosures, among other consequences. It is not known how long such impacts, or any future impacts of other significant events described above, will or would last, but there could be a prolonged period of global economic slowdown. 

The Fund will concentrate its investments in real estate industry securities. The value of the Fund’s shares will be affected by factors affecting the value of real estate and the earnings of companies engaged in the real estate industry. These factors include, among others: (i) changes in general economic and market conditions; (ii)changes in the value of real estate properties; (iii) risks related to local economic conditions, overbuilding and increased competition; (iv) increases in property taxes and operating expenses; (v) changes in zoning laws; (vi)casualty and condemnation losses; (vii) variations in rental income, neighborhood values or the appeal of property to tenants; (viii) the availability of financing; (ix) climate change; and (x) changes in interest rates. Many real estate companies utilize leverage, which increases investment risk and could adversely affect a company’s operations and market value in periods of rising interest rates. The value of securities of companies in the real estate industry may go through cycles of relative under-performance and over-performance in comparison to equity securities markets in general. 

A significant portion of the Fund’s underlying investments are in private real estate investment funds that comprise the NFI-ODCE Index (“Eligible Component Funds”). Investments in Eligible Component Funds may pose specific risks, including: such investments require the Fund to bear a pro rata share of the vehicles’ expenses, including management and performance fees; the Adviser and Sub-Adviser will have no control over investment decisions may by such vehicle; such vehicle may utilize financial leverage; such investments have limited liquidity; the valuation of such investment as of a specific date may vary from the actual sale price that may be obtained if such investment were sold to a third party. 

Additional risks related to an investment in the Fund are set forth in the “Risks” section of the prospectus, which include, but are not limited to the following: correlation risk; credit risk; fixed income risk; leverage risk; and risk of competition between underlying funds. 

 Investors should carefully consider the investment objectives, risks, charges and expenses of the Accordant ODCE Index Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained online at accordantinvestments.com. The prospectus should be read carefully before investing.  Investors should consult with their selling agents about the sales load and any additional fees or charges their selling agents might impose on each class of shares.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Accordant ODCE Index Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained online by visiting www.accordantinvestments.com. The prospectus should be read carefully before investing. For differences between the Class A shares and Class I shares, please see the prospectus of the Fund

Past performance is no guarantee of future results. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) redistributed without Accordant’s prior written consent.

The Accordant ODCE Index Fund is distributed by ALPS Distributors, Inc (ALPS). Accordant Investments LLC is not affiliated with ALPS.