NASAA Releases Investor Alert on Opportunity Zone Funds

For instance, the complex regulatory landscape such as evolving tax laws and regulations "could alter the effects on the investment," the alert warns.

Also, investors should weigh the tax benefit vs. risk of loss. "While the short- and long-term tax benefits are attractive, opportunity zone investments are still risky. An investor could avoid a capital gains tax only to lose their entire investment in the QOF," the alert explains.

Investors should also determine if they'll need the money in the next five, seven or 10 years, as "the longer the investor leaves their money in, the greater the potential tax benefit."

What about the QOF manager? "Opportunity zones are a new program, making it difficult to determine how the experience of the QOF manager may translate to opportunity zone investment success," the alert warns.

Investors should ask: "Is the fund manager subject to investment adviser registration requirements? Do they have experience with other tax incentivized investment programs? Have they operated investments in economically distressed areas? How will the fund manager be compensated and what other fees will investors pay?"