For investors in Pennsylvania and elsewhere who are looking for the diversity of a mutual fund with the high returns of real estate, an interval fund may be worth looking into. These funds allow an investor direct access to a variety of investment types such as private real estate equity and debt. It may also be possible to invest in commercial real estate credit without having to put up as much to make the investment.
There is one potential drawback to investing in a real estate interval fund. Investors can only liquidate their holdings once a quarter as opposed to each day like a typical mutual fund. However, this is what generally allows for higher returns as the price of liquidity is generally an asset that offers a lower return on average. Therefore, being required to keep the asset for at least a quarter may be in the investor’s best interest in the long run.
Another benefit is that there is lower correlation to traditional equity markets. In other words, the value of an interval fund won’t necessary fluctuate when the larger market goes through a period of volatility. It’s roughly the same concept as buying a house in that the value doesn’t change on a daily basis but gradually over a longer period of time.
Those who are looking to invest in commercial real estate may want to do so with the help of an attorney. Because of their background and exposure, attorneys might review the holdings of an interval fund or REIT to see if there are any potential problems with a property.