Three Things to Know About Private Real Estate Credit

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While many investors typically think of real estate investing in terms of real estate investment trusts (REITs) and direct investments in properties like homes, apartments and warehouses, there are other ways, including the private real estate space.

In the current interest rate environment, one of the most talked about areas within the private real estate sector is real estate credit, an asset class which has historically been relatively opaque and predominantly available only to institutional investors.

At a time when financial professionals are increasingly looking for differentiated alternative investment products for diversification1 and return benefits, these are the three things you need to know about the growing asset class.

Opportunity for non-correlated returns

One of the biggest draws to alternative investments in general, and a primary reason for the recent uptick in demand for these asset classes among investors, is their distinct risk/return profile and non-correlation to public markets.

Real estate credit is no different than other alternative investments in that regard.

Over the past 10 years, real estate credit has offered high single-digit income returns with significantly less volatility than REITs or equity and fixed income markets.2 This asset class has been around for many years in the institutional arena, and it has a track record of stable and non-correlated returns. Specifically, private real estate credit has delivered an 8.5% annualized total return, in line with direct lending and real estate equity strategies, but with significantly lower volatility.3