Trevor Bisset

Feb 08. 00:39

Interview (Part 1 of 2): The USQ Core Real Estate Fund Passes the $100 Million AUM Benchmark

USQ Logo superimposed over a cityscape with blossoming trees in the foreground.


The USQ Core Real Estate Fund (USQIX, USQSX) recently crossed an important benchmark – over $100 million in managed assets.

It’s certainly a milestone; the ten largest interval funds represent roughly half of total interval fund AUM, featuring names like Apollo, Stone Ridge, PIMCO, and Ares, so establishing a $100m foothold is no insignificant feat for independent Pennsylvania-based fund manager Union Square Capital Partners (“USQ”).

Fund Overview

The Fund, launched in September of 2017, offers investors a shot at current income and capital appreciation via access to a portfolio of institutional quality private real estate funds.

While an investor would have to be a limited partner to invest in USQ’s top holding, the private $16b Clarion Lion Properties Fund, retail investors can gain exposure to it for just $2500 upfront via Class IS shares of the Fund (USQSX).

These private real estate funds invest in commercial properties with limited leverage, high occupancy rates, and tenants of strong credit quality – as a result, they tend to feature moderate volatility and low correlation to public markets.

Combine these factors with the quarterly liquidity offered by most interval funds, and you have a recipe for opportunistic investing while daily redeemable funds are liquidating during short-term sell-offs. We covered this phenomenon during the IPA’s interval fund conference last month, and it’s one of the reasons why investors and RIAs should explore interval funds as a way to diversify a traditional 60/40 portfolio.

As of 9/30/2021, USQIX had delivered a YTD total return of 11.30%, with a distribution rate of 4.11%.

Why $100 Million Matters: Interview With Tom Miller, CIO, and Keith Downing, COO (Part 1 of 2)

We were fortunate to speak with Tom and Keith of USQ about the significance of bringing the Fund’s AUM into 9-digit territory. Thanks for taking a moment to chat with us, and congratulations on reaching the $100 million milestone!

IF: Let’s chat about the early days. You took the USQ Core Real Estate Fund live in September 2017, when asset managers like Griffin, Versus Capital, and Bluerock were already operating real estate-focused interval funds. What led to your belief that a newly formed, independent manager like USQ could find its own place in that market?

Tom: The funds you mentioned, they're all great funds. Our approach is different; we wanted to provide true core exposure and do it at a low cost, and so that's what we set out to do. We felt like the market needed a true building block with the most core of private real estate exposure. None of the other strategies that you mentioned do that in a in a similar fashion.

We felt like this space was necessary for advisors who wanted to allocate at their discretion to publicly traded REITs and also to private REITs. We fit that box, and we did it at a low cost.

Additionally, we wanted to provide something that has traditionally been inaccessible to a broader base of investors and do so at a fair price. We’re huge believers in publicly traded REITs, but we believe you should separate the two and have both a dedicated allocation to publicly traded REITs, which is highly liquid, and a dedicated allocation to private REITs, which are inherently less liquid. Most of our competitors try to put that all in the interval fund structure and our approach is different.

That’s why we felt the space needed a different solution, and that’s why we entered the space.

IF: The non-traded REIT is interesting to me, because if you’re not trying to time the market, why would you pay for the daily liquidity of a publicly traded REIT and sacrifice yield?

Tom: I agree, the private real estate markets are very different. We sit nicely between the non-traded and publicly traded REIT because we offer more liquidity – by mandate we offer at least 5% liquidity on a quarterly basis – so we’re trying to be an access point to an index that most people have not been able to gain exposure to (NFI-ODCE), but still be able to provide some liquidity.

We understand that advisors sometimes need liquidity, things happen, there are reasons for liquidity that you don’t want to lock up cash in a ten-year hold. So, we provide quarterly liquidity that I think is sufficient if you want to get access to a private real estate asset class.

IF: Absolutely. We’ve spoken with alternative asset platforms who won’t start paying attention to an interval fund until it has at least $50 million AUM, and thresholds to qualify for traditional custody platforms can reach north of $150 million AUM. What did fundraising and distribution look like for USQ during those first few months after launch?

Tom: I wish I could tell you it was easy. The reality is it was difficult, but we knew that we wanted to focus on the RIA channel for a number of reasons – long-term focus, more sophistication, for example – but we also knew it would take time to educate RIAs before they committed to investment. We set out with a very educational sale. We wanted to introduce advisors to what the NFI-ODCE was first, the benefits and drawbacks of interval funds, and then continue to be a resource for them as they went through due diligence.

We were able to do that with intense focus on the space, didn’t veer away from it, and I agree that certain platforms won’t look at you until $50m. We initially targeted platforms that would onboard the fund at lower AUM levels. We focused on firms using these custodians, while at the same time, continued to educate advisers using the other custodians until we reached the demand thresholds to get approved at the other custodians.

It was a time-consuming process and people that enter the space that think they’re going to do it quickly – are going to be disappointed. You have to be willing to spend the time and educate.

IF: “B2B2C education,” if you will, seems to be where everyone comes to in terms of conversations about RIA barriers to entry.

Tom: Yeah. We have a nice product in that our strategy is tangible; it’s real estate, it’s in major markets across the country, and that resonates with both advisers and end investors. We have a bit of an advantage in that we’re not trying to do anything too esoteric, we are providing inexpensive access to an investment that otherwise is difficult to access. That certainly worked in our favor.

Keith: RIAs have a much longer due diligence cycle and we knew that going in. We knew we’d have to build a track record and educate them. Fees are very important in this channel, so it was helpful that we built and priced the product appropriately. We focused on education around the asset class and the product structure, performance and portfolio fit, and the benefits and considerations related to the interval fund structure.

Learn more about how the USQ Core Real Estate fund reached $100m AUM, and what it means for the Fund, in Part 2.

USQ’s original press release about their $100 million milestone can be found here.

If you’d like to join us for an interview, feel free to reach out at Or, follow @interval_funds on Twitter and shoot us a DM.

Note: This article is for information purposes only, and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service referenced herein.

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