Many private real estate strategies are set up as closed-end vehicles, a type of fund structure that can expose investors to “vintage risk.” Vintage risk is the risk that a large portion of a real estate fund’s properties are acquired during a period of high prices, making it difficult to sell them for a gain in the future.
In our view, high-quality income generation—and not capital appreciation—will be the primary determinant of real estate returns over the next few years.
Given the surprisingly solid bond market performance of 2017, what might fixed income investors expect in 2018? Unfortunately, lower returns. Despite favorable risk asset performance expected from strong earnings growth and ongoing demand, in our view investors should not expect to earn a return higher than the yield of the Bloomberg Barclays Aggregate Index, which was 2.71% at year end. Instead, we believe investors are likely to experience higher volatility and lower returns this year versus what they enjoyed in 2017.
For several years, we have referred to the US economy as a “caterpillar” economy. Since the 2008 Great Recession, the economy has inched along, alternately accelerating and decelerating, as it continues to steadily gain ground. For 2018, we foresee another year of caterpillar-like growth.
Synchronized Global Expansion Fosters Optimism
The challenges of the current low-yield environment call for investing strategies beyond conventional rising-rate investment solutions. Fixed Income investors seeking higher income, principal protection, and risk mitigation should consider diversifying their bond holdings with a portfolio of low-duration, mid-grade securities.
How will the markets react when the central bankers begin to unwind their bond positions?
A Temporary Lull Won’t Derail Growth
Rise of E-Commerce Creates Opportunities in Retail
Growth Continues on Trend; Outlook Cautiously Optimistic
Wealth Management Industry is Relationship Based
Hedging Inflation in a Trump Economy
Fiscal Policy Details Lacking
Administration Change Highlights the Benefits of our Strategy
Municipal Bonds Look Attractive After Selloff
Commercial Real Estate Returns Slowing
Client Servicing Drives Relationship Between Investors and Asset Managers
Pension Plans Struggle to Meet Underwriting Assumptions