Private Real Estate vs. AGG Total Return

July 29, 2022

Private Real Estate has historically generated attractive returns with significantly less risk compared to public equities. As interest rates rise, some investors are questioning what kind of fixed income real estate can provide.

We believe certain areas of private real estate still offer significant value, and yields have a way to go before making a somewhat fair income argument. Additionally, rising rates have not hurt the total return profile for real estate like fixed income has seen.

This is partially indicative of inflation benefits seen in the real estate asset class. The chart below illustrates the performance differential between the NCREIF Property index and the Bloomberg US Aggregate Bond index as we have seen the 10-year treasury yield spike.

Private Real Estate vs. AGG Total Return Since Rate Trend Reversal

Private Real Estate vs. AGG Total Return Since Rate Trend Reversal

We believe it’s clear why private real estate is included in our all-weather portfolio.

Several key factors allow this asset class to perform across market regimes:

  • Consistency of returns
  • Income production
  • Resiliency in rising interest rate and inflationary environments

As we endure tumultuous and prosperous markets alike, we believe private real estate provides ballast for portfolios to help investors generate attractive risk-adjusted returns.

Contact us today to discuss your situation and learn how your portfolio may benefit from the consistent income of private real estate.