Novogradac Opportunity Fund Tracking Surpasses $20 Billion
Qualified opportunity funds (QOFs) tracked by Novogradac surpassed $20 billion in funds raised through the end of September, a 15.8% jump since the end of June.
As of Sept. 30, Novogradac was tracking 1,243 QOFs. The 909 funds that furnish a specific amount of equity raised reported $20.28 billion in funds at the end of September–an increase of $2.76 billion from the amount raised by QOFs at the end of June. Looking forward to the next three months, there’s reason to expect investment to continue to grow: Barring an extension of the opportunity zones (OZ) incentive past the end of 2026, taxpayers face a Dec. 31 deadline to invest in QOFs and benefit from the 10% exclusion of gains for investments held five years.
Novogradac’s QOF data comes from a rolling collection of information from QOFs voluntarily providing information to Novogradac or other public sources such as Securities and Exchange Commission filings and press releases. Novogradac’s list includes single- and multi-asset funds, but does not include proprietary or private funds that are owned and managed by their principal investors. As such, the total investment in QOFs is higher than $20.28 billion–perhaps by a factor of three, four or more.
Novogradac provides a full report on QOF investment every six months. The June 30, 2021, report included 1,171 QOFs (of which 853 reported an equity raise) and $17.52 billion in investment.
As it has been for the entirety of the time Novogradac has tracked QOFs, residential development is the leading area of investment. Of the QOFs reporting a specific equity amount, $15.56 billion was raised by QOFs with at least some focus on residential development (of which $4.84 billion was raised by QOFs with an exclusive focus on residential). QOFs with at least some focus on commercial development had raised $12.19 billion as of Sept. 30, while QOFs with some focus on hospitality raised $3.02 billion, those with some focus on operating businesses raised $680.2 million and those with some focus on renewable energy raised $642.5 million. Due to overlapping areas of investment interest, the sum of the investment categories vastly surpasses $20.28 billion.
Since the end of June, QOFs focused only on hospitality saw investment increase by 102.4%, although that category started at a lower equity figure than most others in the Novogradac data. QOFs focused strictly on commercial development also saw a large increase, going up 49.1% over the three-month period. Among QOFs that have a partial–but not exclusive–focus on renewable energy and operating businesses, there were increases of 40.1% and 40.0% in equity raised during the three-month period.
QOFs focused on a single city or multiple cities for their investments continue to make up the majority of funds and equity raised, although QOFs with a nationwide focus have raised nearly the same amount of equity as the other two categories. Single-city-focused QOFs have raised 29.5% of all equity, multi-city focused funds have raised 27.7% of the total and QOFs with nationwide focus have raised 27% of all equity.
Novogradac began tracking QOFs in May 2019. The QOFs being tracked by Novogradac crossed the $5 billion mark in equity raised in January 2020, exceeded $10 billion in April 2020 and surpassed $15 billion in December 2020.
Novogradac’s next full report on QOF investment—covering investment through Dec. 31, 2021—will be published in early 2022. In the meantime, follow OZ investment trends by subscribing to the Novogradac Journal of Tax Credits.
The information contained in this blog post is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy securities. Novogradac does not provide investment advice and the information in this report is not to be construed as a recommendation to engage in any specific transaction. Readers are urged to consult with their own professional advisors if they are considering investing in a QOF.