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Why Invest in Real Estate?

Adding real estate to a traditional investment portfolio of stocks, bonds, and treasury bills introduces a historically non-correlated asset that may reduce risk and enhance overall return.

iPERE – An Overview

Institutional private equity real estate (iPERE) can be described as high-quality commercial properties that are usually congregated in large investment portfolios managed professionally on behalf of third-party owners or beneficiaries. The purpose of the information presented herein is to summarize the historical performance of iPERE. The leading benchmark index for iPERE is the National Council of Real Estate Investment Fiduciaries Price Index (NPI) which represents a collection of 7,000+ institutional properties representing all major commercial property types within the U.S. The chart below illustrates the annual performance of the NPI. Since 1978 (when the index was created), the NPI has experienced only four down periods, irrespective of macro-economic, political, and various real estate cycles.


Historical Values


NPI Annual Total Return | 1978-2016


NPI Annual Total Return | 1978-2016
Source: National Council of Real Estate Investment Fiduciaries Price Index. Federal Reserve of St. Louis, Target Federal Funds Rate.


10 Year Total Return (2006-2015*)

Past performance is no guarantee of future results.

*Information contained herein was created by the Sponsor and has not been independently veri­fied. The data presented includes information collected from the various indices described in more detail below, and do not include fees and expenses which could significantly alter performance. As such, the scenarios presented herein may not occur and performance could vary greatly.


Positive performance in rising interest rate periods

During the most recent seven periods of significant interest rate increases since 1978, iPERE (as measured by the NPI) has provide attractive yields and total returns in all seven periods.

Cumulative NPI Returns During Periods of Fed Funds Rate Increases

Cumulative NPI Returns During Periods of Fed Funds Rate Increases copy
Sources: National Council of Real Estate Investment Fiduciaries Property Index (NPI), Federal Reserve of St. Louis, Target Federal Funds Rate.


REIT-like returns, with less than half the volatility

Since the National Council of Real Estate Investment Fiduciaries (NCREIF) began measuring iPERE in 1978, only four years have experienced negative returns. NPI has performed much like the traded REIT sector over long periods of time only with much less volatility. In the last 10 years, total annualized returns were nearly identical for the two asset classes, however NPI achieved these similar returns with half of the annual volatility. In addition, NPI reached its total return mark with a greater percentage of its return coming from income.

iPERE vs. Stock and REIT returns | 1978-2015

iPERE vs. Stock and REIT returns, 1978-2015

Sources: National Council of Real Estate Investment Fiduciaries Property Index, FTSE NAREIT All Equities Index, REIT.com.

10-year
Historical Since NPI Inception

The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.

S&P 500 (Stocks): An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe (Investopedia). Risks include the dynamic fluctuations of the market and possible loss of principal.

NAREIT All Equity Return: The FTSE NAREIT US Real Estate Index Series is designed to present investors with a comprehensive family of REIT performance indexes that span the commercial real estate space across the US economy, offering exposure to all investment and property sectors. The FTSE NAREIT All Equity REITs index contains all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria.

The NPI Property Index: a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors – the great majority being pension funds. As such, all properties are held in a fiduciary environment.

The Wilshire US Real Estate Investment Trust Index (Wilshire US REIT) measures U.S. publicly-traded real estate investment trusts and is a subset of the Wilshire US Real Estate Securities Index (Wilshire US RESI). Designed to offer a market-based index that is more reflective of real estate held by pension funds, these indexes are unencumbered by the limitations of other appraisal-based indexes.

iPERE/NCREIF Property Index (NPI): Institutional private equity real estate (iPERE) can be described as high-quality commercial properties that are usually congregated in large investment portfolios managed professionally on behalf of third-party owners or beneficiaries. The leading benchmark index for iPERE is the National Council of Real Estate Investment Fiduciaries Price Index (NPI) which represents a collection of 7,000+ institutional properties representing all major commercial property types within the U.S. The NPI is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors – the great majority being pension funds. As such, all properties are held in a fiduciary environment.

Bonds: Federal Reserve of St. Louis 10-year yields, represents medium term fixed income yields.

T Bills: 3-month treasury bill yield, represents short term fixed income yields. The 10-year and 3 – month government bonds are considered low risk investments backed, but not guaranteed, by the U.S. Government.

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