Investors in RE private debt less worried

In the face of persistently high market volatility, investors with money in private real estate debt are more optimistic than those invested in equities, according to alternative investment platform provider AltX.

His observation was that while listed equity returns remained higher, so did risk, while private debt investors had better visibility of their risk as they lend directly to borrowers and can use loan-to-value ratio factors. value (LVR).

They could also better monitor borrowers’ exit strategy to assess the risk of their investment in the event of non-performance, not to mention benefiting from a buffer isolating private investors from market declines.

At the same time, given the availability of data accessible to so many people, stock markets were often driven by “animal spirits”, where prices could fall quickly and sharply, without logical explanation, in addition to exposure to disasters such as the recent pandemic.

On the other hand, private debt offered investors the opportunity to diversify their portfolio with an asset that had little correlation to other investments and offered safer returns in an unpredictable market.

“So even when the markets turn volatile, the product is designed to ensure that you continue to receive consistent returns. And that’s reassuring if you rely on a steady income to maintain your lifestyle,” the firm said.

“If you’ve been procrastinating, now may be the time to revisit your asset allocation and consider looking beyond traditional asset classes. Private real estate debt can be a valuable addition to a more stable, reliable and less volatile portfolio.

Carol M. Barragan