ThinkAdvisor recently featured Delegate Advisors President and Chief Advisor Andy Hart in an article about Opportunity Zone funds. In the piece, Hart describes how Opportunity Zone funds might attract investors who are sitting on gains of highly appreciated assets, such as tech stocks, and want the ability to defer taxes on those gains. Because the final rules and regulations regarding Opportunity Zones have not yet been finalized, most funds attempting to capitalize on them have not yet come to market. We anticipate that, once the rules and regulations are final, fund managers will begin aggressively marketing investment options.
Opportunity Zones are often high-need communities selected by states and are located throughout the U.S. Thus, Opportunity Zone funds not only have the potential to provide tax benefits for investors, but also the potential to create positive impacts on low-income communities.
In fact, Opportunity Zone funds might become a viable option for investors with capital gains, a long time horizon, and a desire to make socially responsible investments. With Opportunity Zone funds, investors can receive certain tax benefits with respect to their capital gains as long as they reinvest their gains into a fund that places a defined proportion of its assets into a business located in an Opportunity Zone.
Investments in Opportunity Zones, however, are not a guaranteed success. Rather, these investments are “potentially great but they have to be a good investment to begin with,” explains Hart. “If it happens to be in an opportunity zone, we would look to rebalance a client’s portfolio to generate gains and then invest in a fund. We focus first on the investment side, not the taxes.”