Real estate increases risk-adjusted returns of a diversified investment portfolio and provides a good hedge against inflation.
According to an asset allocation study performed by Cadre, the US real estate investment platform, including commercial real estate to an investment portfolio contributes to (a) lower volatility, (b) higher risk-adjusted returns, and (c) hedging against inflation.
The NY-headquartered fintech company compared performances of US stocks, bonds and private real estate over the last 20 years and looked at the benefits of including real estate in varying proportions with stocks and bonds.
The main conclusion is that adding real estate to a traditional portfolio helped investors achieve a more stable risk/return profile over time, while also providing real income that historically outpaced inflation. In particular, private real estate returns outpaced inflation by approximately 6% in all inflationary environment.
