The Case for Investing in US Core Real Estate

The large size of the U.S. and its variety of economic drivers provide both a very large investment opportunity and diversification benefits to international real estate portfolios.

US open end core funds maximize these benefits and help mitigate the risks of cross-border investing by offering immediate diversification across U.S. markets and property types, steady income, and high transparency thanks to the availability of a widely used benchmark, the NCREIF Open End Diversified Core Equity (ODCE) Index. They can also be a tax efficient option for institutional investors and typically outperform direct investments in their first year in rising market environments.

Core open end funds are an especially efficient way to access the US market because they provide immediate diversification, even for investors with small ticket sizes.

For real estate investors venturing across borders, the US market is attractive as a as a first, or second, step. Its large size and transparency means cross-border investors can access more opportunities for the same fixed search and time costs associated with learning a new market. US core real estate returns have historically provided diversification benefits. US returns have correlations well below one with other major real estate markets. And the US market has investable property types not available in many other markets, including a large multifamily sector and niche property types like medical office.

Core open end funds are an especially efficient way to access the US market because they provide immediate diversification, even for investors with small ticket sizes. Funds are diversified by property type, markets, tenants and assets, which reduces concentration risk. It is especially valuable because of large differences in drivers between US markets and property types, ranging from technology (San Francisco Bay Area) to government (Washington DC), to healthcare (medical office). The scale of an open-end core fund gives investors access to larger deals, specialized niche sectors, and acquisition opportunities that are inaccessible to smaller investors.

Core funds also benefit from the highly transparent NCREIF ODCE Index benchmark, tend to outperform direct investments in their first year, and offer tax efficiency.


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Written by Bill Maher and Dan Mahoney

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