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OPPORTUNITY ZONE FUNDS:

INVESTORS WAITING IN THE WINGS

O
pportunity Zone Funds (OZFs) are
investment vehicles targeting properties,
businesses and other assets within outlined
opportunity zones in the US. These zones
were created alongside the Tax Cuts
and Jobs Act of 2017 and allow for investment
in distressed areas. There are around 8,700
opportunity zones demarcated across the country,
and investors can receive significant deferrals on
their capital gains taxes by investing in opportunity
zones.
There is a lot of interest surrounding the newly
introduced OZF market. In January 2019, Preqin
conducted a survey of investors to gauge their
perception of these new investment vehicles, and
understand how OZFs may impact their investment
plans going forwards. Due to the uncertainty
surrounding unfinished regulations, as well as the
risks associated with investing in distressed regions,
the survey found that LPs are wary of investing in
opportunity zones, with 92% of surveyed investors
not currently invested in OZFs. However, 51% of
respondents are considering investing in OZFs
in the next 12 months, and a further 12% would
be interested in investing after this timeframe,
highlighting the interest in this nascent industry.

Fig. 1: Investors’ Plans for Opportunity Zone Funds Fig. 2: Real Estate Strategies Targeted for
in the Next 12 Months Investors’ Opportunity Zone Fund Investments

4 Funds or More 7% 7% $350mn or More

$100-349mn Opportunistic 78%
4% 2% $50-99mn
2-3 Funds 27%
Value Added 78%

Core 49%
87% Less than $50mn
1 Fund 66% Core-Plus 43%

Distressed 37%

Debt 29%
No. of Funds Amount of Capital
Source: Preqin Investor Interviews, January 2019 Source: Preqin Investor Interviews, January 2019

Fig. 3: Regions Targeted for Investors’ Opportunity Fig. 4: Property Types Targeted for Investors’
Zone Fund Investments Opportunity Zone Fund Investments

Diversified 81%
West 94%
Residential 60%

Southwest 94% Industrial 56%

Office 54%
Northeast 90% Niche 40%
Retail 27%
Southeast 85% Hotel 25%
Operating Company 23%
Midwest 81%
Land 19%
Source: Preqin Investor Interviews, January 2019 Source: Preqin Investor Interviews, January 2019

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Fig. 5: Opportunity Zone Funds in Market by Fig. 6: Opportunity Zone Funds in Market by
Target Size Manager Experience
100%
11
80% 2 $500mn or More
9.0
$350-499mn 30%
60% Emerging
31 $100-349mn Manager
40% 0.9
$50-99mn
Established
20% 11 5.2 Less than $50mn Manager
70%
7 0.6 0.2
0%
No. of Funds Aggregate Capital
Raising Targeted ($bn)
Source: Preqin Pro. Data as at February 2019 Source: Preqin Pro. Data as at February 2019

Fig. 7: Opportunity Zone Funds in Market by Geographic Focus

Alaska MIDWEST

6%
NORTHEAST

NATIONAL 14%

18%
WEST
41%
Hawaii

SOUTHWEST
SOUTHEAST
6% 14%
Source: Preqin Pro. Data as at February 2019

PREQIN INSIGHTS
For the full survey write-up and data pack, please visit:
www.preqin.com/insights

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