Private real estate: Unlocking opportunities beyond stocks and bonds

CONTRIBUTORS

Tony Davidow, CIMA®

Senior Alternatives Investment Strategist
Franklin Templeton Institute

Priya Thakur, CFA, CAIA

Analyst
Franklin Templeton Institute

Key takeaways

Private real estate is a significant portfolio allocation for family offices and institutional investors.
The asset class has historically delivered attractive risk-adjusted returns, an inflation-resistant income stream, and portfolio diversification—outcomes that resonate in today’s market environment.
Opportunities for individual investors have expanded with the introduction of registered funds (interval and tender-offer) that offer daily valuation and greater liquidity.

Private real estate has long been prized by family offices and institutional investors for its historical investment characteristics: durable income, competitive returns, inflation hedging and portfolio diversification. According to the UBS Global Family Office survey,¹ the average allocation to real estate was 13%. Among institutional investors, the allocations range by institutional segment, and the size of the institution.

How Institutions Allocate to Alternatives

Exhibit 1: Alternative Diversification Amongst Institutional Investors
As of February 5, 2023

Sources: Preqin, CAIA Association (2023).

In this paper, we explore:

Multiple avenues of potential return.
Attractive investment fundamentals.

We believe commercial real estate has historically delivered strong risk-adjusted returns, attractive income, diversification, and inflation hedging. While the office sector has been struggling lately, industrials, multifamily housing and life sciences offer attractive opportunities. Commercial real estate should be viewed as a long-term investment. Product innovation like interval and tender-offer funds have made real estate more accessible, to a broader group of investors, at lower minimums, and greater flexibility.

Endnote

Source: 2023 Global Family Office Report, UBS.

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