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Real Estate

Top 5 reasons to consider an allocation exposure to direct real estate

Town houses

Investors today are re-evaluating risk and reward in their portfolios. Real estate can fulfill a need for stability, diversification, performance, and yield, in a world starved of income.

1. Volatility management

Strategic allocation exposure to direct real estate can help reduce portfolio volatility and can smooth a portfolio’s return profile.*

Reason 3: Volatility line graph
2. Diversification

Commercial real estate may provide portfolio diversification for enhanced market resilience.

Reason 4: Diversification table 
3. Potential inflation hedge

Real estate has often been an inflation hedge.

Reason 5: Inflation line graph
4. Risk-adjusted returns

Historically, real estate has offered investors both strong total return and lower volatility than many other asset classes.*

Reason 2: Returns scatter graph
5. Income

Real estate has traditionally offered investors a higher level of income compared to other asset classes.

Reason 1: Income bar chart
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Past performance is no guarantee of future results. Data source: Index returns provided by Bloomberg. Chart 1 Volatility management: Public U.S. REITs are represented by FTSE NAREIT All Equity REITs Index, Private Real Estate is represented by NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE). Chart 2 Diversification: U.S. Real Estate is represented by the NCREIF NFI-ODCE Index, Listed REITs are represented by the FTSE NAREIT All Equity REITS Total Return Index. U.S. Equities are represented by the S&P 500 Index, Fixed Income is represented by the Bloomberg Barclays U.S. Aggregate Bond Index, 10-Year Treasuries are actual results. Different benchmarks, economic periods, methodologies and market conditions will produce different results. There is no assurance that any asset class or index will provide positive performance over time. It is not possible to invest directly in an index. See next page for important disclosures regarding asset class related risks and definitions for representative indexes

Chart 3 Potential inflation hedge: Data source: Real estate net operating income is from the NCREIF NFI-ODCE Index and U.S. Inflation is provided by Moody’s Analytics, 2022. Chart 4 Risk-adjusted returns: U.S. commercial real estate is represented by the NCREIF NFI-ODCE Index, U.S. equities are represented by the S&P 500 Index, U.S. investment grade bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index, U.S. T-bills are represented by 3 month U.S. T-bills, and public U.S. REITs are represented by FTSE NAREIT All Equity REITs Index. Volatility is represented by standard deviation. Standard Deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation and volatility. Chart 5 Income: U.S. commercial real estate income is represented by the income return component of the NCREIF NFI-ODCE Index, U.S. investment grade bond income is represented by the yield to maturity of the Bloomberg Barclays U.S. Aggregate Bond Index, U.S. equity income is represented by the dividend yield of the S&P 500 Index, and U.S. T-bill income is represented by 3-month U.S. T-bills.


NFI-ODCE Index The NCREIF Fund Index - Open-End Diversified Core Equity (NFI-ODCE Index) is a fund-level capitalization weighted, time-weighted return index and includes property investments at ownership share, cash balances and leverage (i.e., returns reflect the fund’s actual asset ownership positions and financing strategy). NFI-ODCE Index Income Return: Measures the portion of total return attributable to each property’s net operating income (NOI) It is computed by dividing NOI by the average daily investment for the quarter. S&P 500 Index The S&P 500 is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Bloomberg Barclays U.S. Aggregate Bond Index The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and nonagency). FTSE NAREIT All REITs Index The FTSE Nareit All REITs Index is a market capitalization-weighted index that and includes all tax-qualified real estate investment trusts (REITs) that are listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market List.

Net operating income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property, minus all reasonably necessary operating expenses

Please discuss your investment portfolio, and whether or not investment in real estate makes sense for you, with your financial advisor

*While commercial real estate may help manage against volatility, it does not have the liquidity of a listed security. Please note real estate investments have different risk and return expectations from other asset classes, due to differences in liquidity, expenses, tax and other features. Real estate investments are not substitutes for other asset classes and should be considered in light of diversification objectives

Asset Class Related Risks: There are risks inherent in any investment, including the possible loss of principal. Different types of asset investments have different risks and attributes resulting in different outcomes. These differences can include: investment objectives, costs and expenses, liquidity, fluctuation of principal or return, and tax features. In general, equity securities tend to be more volatile than fixed income or hybrid securities. Foreign investments may involve exposure to additional risks such as currency fluctuation and political and economic instability. The value of, and income generated by, debt securities will decrease or increase based on changes in market interest rates. High yield corporate bonds are subject to liquidity risks and heightened credit risk. Government bonds are guaranteed as to the timely payment of principal and interest.

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