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Overall QOF Equity Bounces Back in Second Quarter, but Far Behind 2022 Numbers

Published by John Sciarretti on Wednesday, August 2, 2023 - 12:00AM

Qualified opportunity funds (QOFs) tracked by Novogradac reported raising $2.01 billion in equity over the first six months of 2023, including $1.33 billion during the second quarter of the year.

Equity reported by QOFs tracked by Novogradac reached a cumulative $36.10 billion as of June 30, 2023. Novogradac is tracking 1,731 QOFs, of which 1,330 report a specific amount raised.


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The amount of equity reported by QOFs for January through June 2023 is the lowest half-year total for any period since Novogradac began tracking QOF equity data. However, the second-quarter equity raise was an improvement after a record-low first quarter. The second quarter total ranked 11th out of 16 such similar periods in the history of the QOF data, while the first-quarter total of $681.9 million was the lowest three-month total.

QOFs are the investment vehicle through which taxpayers invest capital gains to qualify for deferral and other tax benefits. Novogradac collects data on a rolling basis from QOFs that voluntarily provide information. The data also includes information from public sources such as Security and Exchange Commission filings and press releases. Novogradac’s figures don’t include proprietary or private funds owned and operated by their principal investors. It is expected that actual opportunity zones (OZ) investment is greater than the Novogradac total by a figure of three or four times.

The slowing of QOF investment goes back a year. The final half of 2022 saw $3.60 billion in investment, a drop from the $6.09 billion raised in the first half of the year. The past four quarters are the bottom four quarters in terms of percentage increase since Novogradac began tracking such data in 2019. This trend is consistent with the broader real estate sector for 2023 as investors have seemingly taken a pause to reset expectations in response to the changing macroeconomy.

Since capital gains are the main source of QOF investment, it’s instructive to look at how the stock market performed during the yearlong periods that ended with the recent quarters. At the end of 2022, the Dow Jones Industrial Average had dropped 8.7% over the previous 12 months and at the end of the first quarter of 2023, the Dow was down 4.0% over a 12-month period. The 12-month period ending June 30, however, saw an 11.8% increase in the Dow–which could lead to investors cashing out and resulting in more capital gains for investment.

The median amount of equity raised by those QOFs reporting an equity amount as of June 30 was $4.6 million, the same as Dec. 31, 2022. Since the end of 2022, that amount has been $4.6 million or $4.7 million for every reporting period.

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Residential and commercial development continue to be the primary areas of focus for QOFs, receiving $29.51 billion and $24.14 billion in investment respectively (due to a significant overlap in QOFs that invest in both, the sum of the totals far exceeds the $36.10 billion in total QOF equity raised). QOFs with at least some focus on hospitality have raised $4.05 billion, while those with at least some focus on renewable energy have raised $1.99 billion and those with at least some focus on operating businesses have raised $1.06 billion.

For the first time, Novogradac is reporting not only on the geographic target (cities and states) of specific planned QOF investment, but on the specific types of planned investment (rather than the general investment strategy for a QOF). For QOF investments that Novogradac can track, residential-only development accounts for $12.4 billion in investment and is part of another $10.0 billion in combined investment. Commercial investment is the second area of planned investments, with $3.5 billion designated by QOFs strictly for commercial investment and another $10.3 billion designated for investment that includes a commercial component.

Other blog posts on Novogradac’s QOF data include details on the specific types of investments, the geography of investments and the equity amounts raised by QOFs and QOF managers.

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.

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