Investments and Wealth Monitor: A Case for Private Real Estate Within Investor Portfolios
As institutional institutional investors have optimized their portfolios along the risk and return continuum, real estate has become a meaningful portion of their asset mix, with the average institution allocating nearly 11 percent of its investments to the asset class.1
It is little wonder that real estate has become a portfolio mainstay. The asset class has exhibited low correlations to both stocks and bonds and demonstrated a long track record of achieving attractive risk-adjusted returns. Real estate historically has provided investors a stead source of income as well as an inflation hedge—important features in the current market environment.
Despite these benefits, high-net-worth investors have not accessed the asset class to the same degree as institutional investors. This article explores how carving out a private real estate allocation may be beneficial and provides an overview of the types of real estate investments and strategies available to investors so that they may create a private real estate allocation that is appropriate for their investment objectives, risk tolerance, and liquidity needs.
Sources
1See "Institutional Investors Increased Allocation to Real Estate This Year, Remain Under-Allocated," Commercial Real Estate Direct (December 15, 2020), http://crenews.com/2020/12/15/institutional-investors-increased-allocation-to-real-estate-this-year-remain-under-allocated/.