Goldman Sachs is considering setting up “opportunity funds” to give clients access to a new type of investment vehicle with major tax benefits.
The bank has lots of experience investing in disadvantaged neighborhoods: Over nearly two decades, it has steered billions to fund projects in those areas, Bloomberg notes. Now, because of last year’s federal tax legislation, such investments could become even more attractive.
The law authorizes creation of “opportunity funds” targeting investment in thousands of low-income communities. The part of this that should jump out at financial advisors: By moving capital gains into these funds, investors can defer tax payments on those gains until the end of 2026.
Further, by holding their opportunity-zone investments for several years, investors can reduce their original capital gains tax liability by up to 15%, and eliminate the tax altogether on any gains from the new investment.
“We have a big leg up,” Goldman’s Urban Investment Group head Margaret Anadu tells Bloomberg. “This is investing that we’re already doing.”
Goldman–and presumably other asset managers–are waiting for IRS and Treasury Department guidance before building opportunity funds for their clients. One company that’s gone ahead with a fund is Virtua Partners, a global private-equity real-estate investment firm.