Equalize Community Development Fund Details
The Fund’s investment objectives are to provide current income, consistent with the preservation of capital, and to enable institutional Fund investors that are subject to regulatory examination for CRA compliance to claim favorable regulatory consideration of their investment under the Community Reinvestment Act of 1977. The Fund seeks to achieve its objectives by investing primarily in a portfolio of 504 First Lien Loans secured by owner-occupied commercial real estate which represent the non-guaranteed portion of a U.S. Small Business Administration (“SBA”) Section 504 transaction. In general, 504 First Lien Loans have the community development qualities that are eligible for favorable consideration under the CRA, whether as so-called community development loans or as qualified investments. This is particularly true for 504 First Lien Loans exceeding $1 million.
Under normal market conditions, the Fund will invest at least 80% of its total assets in 504 First Lien Loans. 504 First Lien Loans are made by financial institutions and other lenders to small businesses for the purchase or improvement of land and buildings. 504 First Lien Loans are not guaranteed by the SBA, the U.S. government or by its agencies, instrumentalities or sponsored enterprises.
The Fund may borrow money for investment purposes, to satisfy repurchase requests from shareholders and to otherwise provide the Fund with liquidity. For example, the Fund may borrow money through a credit facility or other arrangements to manage timing issues in connection with the acquisition of its investments (i.e., to provide the Fund with liquidity to acquire investments in 504 First Lien Loans in advance of the Fund’s receipt of proceeds from the sale of additional Fund shares or the receipt of redemption proceeds from the sale of one or more 504 First Lien Loans). The Fund also may borrow money to fund repurchase payments to Fund shareholders. Any such borrowings, as well as the issuance of notes or other forms of indebtedness, would constitute leverage. The use of leverage for investment purposes increases both investment opportunity and investment risk.
The 1940 Act requires a registered investment company to satisfy an asset coverage requirement of 300% of its indebtedness, including amounts borrowed, measured at the time the investment company incurs the indebtedness (the “Asset Coverage Requirement”). This requirement means that the value of the investment company’s total indebtedness may not exceed one-third of the value of its total assets (including the value of the assets purchased with the proceeds of its indebtedness). The Fund’s borrowings will at all times be subject to the Asset Coverage Requirement.
Fees & Expenses
- 1.50% Management Fee
- Total Gross Fees: 2.80%
- Net Fees: 2.25%
- Additional Fee details available from page 22 of the Fund’s Prospectus
The Adviser has contractually agreed to waive or reduce its management fees and/or reimburse expenses of the Fund to ensure that total expenses , taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses (collectively, “Excluded Expenses”) and including organizational and offering costs) do not exceed 1.75% of the Fund’s average net assets until at least May 1st, 2021.
- The Fund is structured as a Delaware statutory trust and is registered as an investment company under the 1940 Act. The Fund will be a non-diversified, closed-end management investment company that operates as an “interval fund.”
- The Fund requires a minimum initial investment of $10,000 and subsequent investments of at least $10,000. The Fund’s target for investment subscriptions is $500 million.
- The Fund expects to declare and pay dividends of net investment income quarterly and net realized capital gains annually. Unless shareholders specify otherwise, dividends will be reinvested in shares of the Fund.
- The shares will not be listed on any securities exchange. Shareholders will not have the right to redeem their shares; however, in order to provide some liquidity to shareholders, the Fund conducts one repurchase offer annually for a portion of its outstanding shares.
- The Fund operates as an “interval fund,” which means that the Fund, subject to applicable law, will offer to repurchase a portion of its outstanding shares at per share NAV annually.
- The Fund will make repurchase offers once every twelve months. For each repurchase offer, the Fund will offer to repurchase 10% of its outstanding shares, unless the Fund’s Board of Trustees has approved a higher amount for a particular repurchase offer.
- It is possible that a repurchase offer may be oversubscribed, with the result that shareholders may only be able to have a portion of their shares repurchased.
Investing in a mutual fund involves risk including the potential loss of principal. There can be no assurance that the Fund will achieve its investment objectives. An investment in the Fund is an appropriate investment only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Investors may lose some or all of their investment in the Fund. The Fund is not designed to be a complete investment program and may not be a suitable investment for all investors.
Capital raised through leverage will be subject to interest and other costs, and these costs could exceed the income earned by the Fund on the proceeds of such leverage. There can be no assurance that the Fund’s income from the proceeds of leverage will exceed these costs. However, the Adviser seeks to use leverage for the purposes of making additional investments only if it believes, at the time of using leverage, that the total return on the assets purchased with such funds will exceed interest payments and other costs of the leverage.
CRA Strategy Risk
The Fund’s goal of holding 504 First Lien Loans so that Fund investors that are subject to regulatory examination for CRA compliance may claim their Fund investment as a community development loan or as a qualified investment under the CRA will cause the Adviser to take this factor into account in determining which loans the Fund will purchase and sell. Accordingly, portfolio decisions will not be exclusively based on the investment characteristics of the 504 First Lien Loans, which may have an adverse effect on the Fund’s investment performance.
504 First Lien Loans are not readily marketable. Illiquid 504 First Lien Loans may impair the Fund’s ability to realize the full value of its assets in the event of a voluntary or involuntary liquidation of such assets and thus may cause a decline in the Fund’s NAV. Shareholders will not have the right to redeem their shares. However, in order to provide some liquidity to shareholders, the Fund will conduct periodic repurchase offers for a portion of its outstanding shares.
504 First Lien Loans are not guaranteed by the SBA, the U.S. government or by its agencies, instrumentalities or sponsored enterprises. The Fund has no limitation on the amount of its assets that may be invested in securities or other financial instruments that are illiquid. Investment in the Fund involves significant risk and is suitable only for persons who can bear the economic risk of the loss of their investment.
The Equalize Community Development Fund is distributed by Foreside Fund Services, LLC which is not affiliated with Equalize Capital or any affiliate. Foreside is not a registered investment advisor and does not provide investment advice.