Bernstein & Feldman, P.A.

Providing Personal Counsel
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Interval funds offer investors expanded opportunities

Interval funds are a form of a mutual fund that grant individual investors in Maryland and elsewhere access to real estate investments normally only available to institutions. Their low minimum investment allow people to seek the potentially lucrative returns associated with commercial real estate credit, private real estate debt and private equity.

These assets within interval funds could produce returns higher than publicly traded REITs or other funds. Investors, however, trade the hope of better returns for reduced liquidity. Unlike other investments that have daily liquidity, interval funds normally restrict distributions to a quarterly schedule. This feature enables fund managers to control risk while pursuing opportunities without the demand for daily payouts.

Equity markets do not strongly influence the performance of interval funds. Volatility in the equity markets might not affect the assets in interval funds because they are not priced regularly through market trades. Property represents as asset that is not priced regularly. Quarterly liquidity also could separate investors from impulsive withdrawal decisions based on nervousness about other aspects of the investment market.

Before a person makes any real estate investment, advice from a financial planner as well as an experienced attorney could be appropriate. An attorney could study the holdings of a commercial real estate fund in order to see if there are and potential problems with a particular building or loan. An attorney could also do the same with respect to a real estate investment trust, and legal counsel could review the previous performance of the sponsors of the fund or REIT before a client makes a final decision.

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