As the third-largest investable asset class, real estate is a vital part of the investment universe. Commercial real estate (which by definition includes multifamily, office, retail, healthcare, industrial, and other property types) represents 17% of the U.S. investment market, according to Nareit, an organization that represents the real estate investment trust (REIT) industry. But, for many investors, real estate remains a relatively small portion of their investment portfolio, and is often misunderstood.
While publicly traded REITs are the most well-known real estate investment vehicle structure, these publicly traded stocks are far from being the only way for investors to access the growth, income-generation, and diversification potential of real estate. Private real estate (PRE) is a major—but not well understood—component of the overall real estate market. Given its size, the range of opportunities and benefits it offers, PRE is a structure that financial advisors and their clients cannot afford to ignore. The primary benefits investors seek with PRE include:
- Investment diversification through lower exposure to public equity markets
- Potential for growth and income
- Lower volatility that drives attractive risk-adjusted returns
- Possible protection against inflation
There are many different ways to access PRE—from non-listed diversified funds to single property investments—presenting financial advisors with a variety of opportunities to find the right mix of strategies, vehicles, and managers to meet their clients’ goals.
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