Why Private Equity Real Estate Investment?
Why Private Equity Real Estate Investment?
By: Eric Cress, President & CEO, UD+P
When I speak to new investors about why they are considering real estate investment, they frequently reflect on the stock market’s detachment from reality. Now, I am an equity investor as well as a real estate investor, and like many have done well by keeping an allocation of my investments in stocks. But in a recent Economist article about research being done at Harvard and the University of Chicago, Gaibaix and Koigen are finding that day traders could be contributing to the detachment of stock prices from fundamentals, potentially exposing cracks in the efficient market hypothesis. This stands to reason as it hardly seems plausible that high-speed traders and day-traders are making investments based on long-term, or even short-term, financial fundamentals.
Maximizing Risk-Adjusted Returns
Regardless, in their 2009 journal article in Real Estate Economics, researchers MacKinnon and Zaman find that direct real estate, or private equity real estate, is an important asset class for maximizing risk-adjusted returns in a portfolio, and offers return characteristics that are distinct from bonds and equities. In fact, they found that across a broad range of return targets, private equity real estate plays a consistent and important role.
Real Estate Investment Trusts Do Not Provide The Same Gains
Furthermore, their research shows that REITs are largely a redundant asset class because their returns are too correlated with equities. So, for those who have access to them, private equity real estate investments are an important part of their real estate portfolio.
How To Invest In Private Equity Real Estate?
Fortunately, there are several new channels for accredited investors to invest in private equity real estate, including @Crowdstreet, @Cadre, and @Fundrise. Or, you may elect to avoid the expense of a channel and go direct with a partner like @Urban Development Partners. Our Accredited Investor platform was designed to serve direct investors without the expenses, and conflict of interests that can arise, with intermediaries.
Learn more at udplp.com