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The Rise of Interval Funds

Advisors are Tapping into Private Markets in an effort to Enhance Portfolio Durability

Investment advisors are continually exploring innovative ways to potentially enhance their clients' portfolios and deliver better risk-adjusted returns. One significant area that has caught advisors’ attention is interval funds, which offer a streamlined approach to accessing the private investment marketplace. This trend not only offers advisors an expanded investment offering but also aligns with the broader goal of constructing more robust and durable client portfolios.

A Notable Pattern of Growth

Private investments were once exclusively accessible to institutional investors and family offices yet have gradually become more accessible to retail investors, thanks largely to the rapid growth of interval fund offerings.

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These funds, regulated under the Investment Company Act of 1940), allow advisors to access a range of asset classes like private equity, private credit, commercial real estate, and more. This shift is driven largely by the private equity asset managers expanding their distribution networks beyond institutions to tap into the more lucrative retail market. 

In addition, many of these managers are collaborating with platform providers such as iCapital and CAIS to further simplify the investment process for advisors. This allows advisors to offer their clients exposure to private market investments without the complexities typically associated with such investments. As a result, advisors now have a wider range of investment options to offer, enabling them to expand and differentiate their practices.

Compelling Advantages

One of the most compelling aspects of interval funds is their ability to provide exposure to asset classes that are often uncorrelated with public markets. This uncorrelation can act as a stabilizing force in clients' portfolios, particularly during times of market volatility. By incorporating private assets in their model portfolios, advisors can enhance portfolio diversification and potentially improve portfolio performance.

A Preference for Private Real Estate

Among the many private asset classes available, private real estate has emerged as a standout performer. It stands as the second-largest asset class in the private markets, and for good reason. Real estate investments have historically provided both income and potential for capital appreciation, making them a well-rounded option for portfolio construction. And though private investments have different characteristics than their public counterparts, advisors are generally familiar with the commercial real estate industry.

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The Appeal of Core Private Real Estate Strategies

Within the realm of private real estate, there are four primary investment strategies–core, core plus, value-add, and opportunistic–and there is a vast range of property sectors to choose from as well. That can make fund selection a challenge for advisors, but a good place to start is with an interval fund that pursues a "core" investment strategy. 

Favored by institutional investors for decades, core investments are the most conservative real estate investment strategy and tend to include only the highest quality properties leased to credit-worthy tenants and located in tier-one markets. Core investments are primarily pursued because of their attractive, reliable income streams and potential for capital appreciation. 

For advisors, a core real estate investment generally resides between stocks and bonds in a client portfolio. This positioning makes it an attractive option for clients seeking a balance between income and growth in their portfolios. By incorporating core real estate interval funds, advisors can offer clients exposure to a tangible asset class that aligns with long-term financial objectives.

And Even a Core Index Fund

When it comes to private real estate interval funds, advisors have an array of options at their disposal. These options span various strategies, property types, and risk levels. It's crucial for advisors to conduct thorough due diligence and educate themselves about the nuances of each fund before making recommendations to their clients.

A core diversified index fund that tracks the performance of an established benchmark, like the NFI ODCE Index, provides a solid starting point. This benchmark has a longstanding history as an institutional favorite, making it a reliable choice for advisors seeking to anchor their clients' portfolios with a stable and proven investment approach.

Where to Start

Many advisors are reallocating their model portfolios to help withstand market volatility and an extended market downturn, which is fueling the growing interest in interval funds and access to the private markets. Advisors are tasked with the responsibility of sifting through the options within the private real estate space to select strategies that align with their clients' objectives. A reasonable place to start their due diligence for many would be to consider the potential benefits of the Accordant ODCE Index Fund, where you can find additional information here.

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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 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.  The Fund intends to rely on exemptive relief sought from the SEC which, if granted, would permit the Fund to issue multiple classes of shares with varying sales loads and asset based service and/or distribution fees. The SEC has not granted such relief and there is no guarantee that such relief will be granted. Until such exemptive relief is granted, the Fund will only offer Class I Shares to prospective investors. 

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 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.

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