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Private Real Estate Investing Jumps the Final Hurdle: Unlocking Opportunities with Accordant Investments

In the ever-evolving landscape of investment opportunities, private real estate can be a compelling asset class for discerning advisors seeking to diversify their clients’ portfolios beyond the traditional stock and bond allocations. Recent advancements in product design have now helped break down many of the barriers that have historically limited investor access to this asset class. 

As a leading voice in the realm of private real estate investing, Accordant Investments created an interval fund, the Accordant ODCE Index Fund that may address the challenges of the past but also potentially opens up a world of advantages for advisors and their clients.

Evolution of Private Real Estate Investing: From Niche to Mainstream

Companies have used private placement offerings for decades as an effective way to raise capital. Early endeavors paved the way for regulatory developments, such as Regulation D in 1982, which introduced the concept of accredited investors1  (individuals with a defined level of wealth or income) as a way of identifying suitability standards for investors. While this regulatory framework aimed to protect investors, we believe it inadvertently created a sense of exclusivity, limiting private real estate opportunities to institutional investors and sophisticated family offices. 

Historical Limitations and Advisor Concerns: Overcoming the Hurdles

Private real estate investments have often been marred by advisor objections. High fees, complexity, lack of transparency, long investment hold times, and illiquidity have topped the list of concerns. Accordant Investments recognized the need for a transformative approach and brought the Accordant ODCE Index Fund to market to effectively address each of these concerns and creating an investment structure that makes it easy for advisors to allocate a sleeve of client portfolios to private real estate.

We believe advisors may appreciate the Accordant ODCE Index Fund's index strategy, which seeks to track a widely diversified core portfolio of professionally managed institutional quality properties which would be almost impossible to create individually. As a publicly-traded interval fund with a straightforward investment structure simplifies the complex nature of traditional private real estate investing, making the asset class accessible to a wider range of investors.

The Potential Benefits of Using Private Real Estate

Many advisors construct client portfolios with a real estate allocation, typically with a publicly-traded security like a Real Estate Investment Trust (REIT), mutual fund, or Exchange-Traded Fund (ETF). But a private real estate investment can offer potential benefits that public securities often cannot. 

We believe one of the key advantages of using a private real estate allocation is greater portfolio diversification. Private real estate often has a low correlation to publicly-traded securities, which can help reduce portfolio volatility and improve investment outcomes, though diversification cannot ensure a profit or protect against loss in a declining market. 

Private real estate may also stand as an effective source of durable income. Investments that hold a diversified portfolio of quality properties in strong geographic markets often generate consistent cash flow from tenant income, which can provide investors with an alternative source of reliable income. 

Furthermore, private real estate offers the potential to enhance portfolio returns due to what is often referred to as the "illiquidity premium." Unlike publicly traded assets that can be bought or sold at any time, private real estate investments typically have long hold times. This illiquidity can lead to higher returns because underlying investment properties in the portfolio aren’t subject to the daily valuations and pricing swings of the public markets. 

Additionally, in certain cycles, private real estate can serve as a hedge against inflation. Real estate values have historically demonstrated a positive correlation with inflation, making the asset class a viable strategy to help protect against the erosive effects of rising prices.

Risk Considerations

As with any investment you evaluate for your clients, private real estate investments are subject to their own risks, which can include general market risk, asset-level risk, concentration risk, and credit risk. Understanding how these factors can impact investment performance can help you make informed decisions on which private real estate investments are most suitable for your clients.

Distinguishing You Practice

Introducing your clients to the Accordant ODCE Index Fund can help distinguish your practice from other advisory firms. By allocating to private real estate with this diversified interval fund, you can offer your clients the benefits of enhanced portfolio diversification, alternative income sources, the potential for enhanced returns, and a potential hedge against inflation. This asset class may not only enhance your clients' investment portfolios but also may position you as a thought leader in the realm of innovative portfolio design.

The once-exclusive world of private real estate has reached a transformative point with the Accordant ODCE Index Fund. Not only is the fund designed to overcome many of the obstacles that have made it challenging for advisors to access the private real estate sector in the past, but it provides you today with a simple way to reallocate model portfolios to an asset class that may have been long missing.

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1. S.E.C Investor Education - Accredited Investor

 

Past Performance is No Guarantee of Future Results.

Investing in the Accordant ODCE Index Fund (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. There 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 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 I shares is September 11, 2023. Class A and Y shares are as of October 24, 2023.

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 shares 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 “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 managed by institutional investment managers (“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 “Risk Factors” section of the prospectus, which include, but are not limited to the following: convertible securities risk; correlation risk; credit risk; fixed income risk; leverage risk; and risk of competition between underlying funds.

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

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.

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