How private real estate can impact a portfolio
Discover how incorporating private real estate into traditional stock and bond portfolios can potentially reduce risk while maintaining competitive returns. Analyze the progressive impact across different allocation strategies from conservative to moderately aggressive.
Portfolio Impact Analysis Across Four Allocation Strategies
Each portfolio demonstrates how adding private real estate from 0% to 20% could affect risk and return profiles. Explore the range of outcomes and efficiency ratios for conservative through moderately aggressive allocations.
Conservative Portfolio
Capital Preservation Focus
20 year risk
6.04%
20 year return
5.00%
For illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Stock, bonds and private real estate are respectively represented by the S&P 500 Index, Bloomberg U.S. Aggregate Bond Index and NFI-ODCE Index; as of 4Q2025. "Risk" is represented by standard deviation.
Impact of Adding Private Real Estate
For conservative investors prioritizing capital preservation, private real estate has historically provided meaningful risk reduction with minimal return sacrifice. Even at modest allocations, volatility decreased substantially while maintaining income-generating potential.
Risk Impact
5.70% (-0.34pp)
Return Impact
5.05% (+0.05pp)
Risk Impact
5.44% (-0.60pp)
Return Impact
5.11% (+0.11pp)
Risk Impact
5.28% (-0.76pp)
Return Impact
5.16% (+0.16pp)
Risk Impact
5.22% (-0.82pp)
Return Impact
5.20% (+0.20pp)
Moderately Conservative Portfolio
Balanced Income and Growth
For illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Stock, bonds and private real estate are respectively represented by the S&P 500 Index, Bloomberg U.S. Aggregate Bond Index and NFI-ODCE Index; as of 4Q2025. "Risk" is represented by standard deviation.
Impact of Adding Private Real Estate
Moderately conservative portfolios could have benefitted from private real estate's ability to reduce volatility while maintaining attractive returns above 6.54%. The allocation balances income stability with modest growth potential, ideal for investors seeking reduced risk without sacrificing meaningful returns.
Risk Impact
7.94% (-0.44pp)
Return Impact
6.63% (-0.02pp)
Risk Impact
7.57% (-0.81pp)
Return Impact
6.60% (-0.05pp)
Risk Impact
7.27% (-1.11pp)
Return Impact
6.58% (-0.07pp)
Risk Impact
7.05% (-1.33pp)
Return Impact
6.54% (-0.11pp)
Moderate Portfolio
Traditional Balanced Approach
20 year risk
11.20%
20 year return
8.21%
For illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Stock, bonds and private real estate are respectively represented by the S&P 500 Index, Bloomberg U.S. Aggregate Bond Index and NFI-ODCE Index; as of 4Q2025. "Risk" is represented by standard deviation.
Impact of Adding Private Real Estate
The classic 60/40 portfolio can potentially gain significant stability through private real estate allocation. Even modest 5% exposure would have reduced volatility by over 5% while sacrificing just 1% of returns. This demonstrates private real estate's powerful diversification capability within balanced portfolios seeking growth with enhanced stability.
Risk Impact
10.63% (-0.57pp)
Return Impact
8.12% (+0.09pp)
Risk Impact
10.12% (-1.08pp)
Return Impact
8.02% (+0.19pp)
Risk Impact
9.66% (-1.54pp)
Return Impact
7.93% (+0.28pp)
Risk Impact
9.27% (-1.93pp)
Return Impact
7.82% (+0.39pp)
Moderately Aggressive Portfolio
Growth-Oriented Strategy
For illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Stock, bonds and private real estate are respectively represented by the S&P 500 Index, Bloomberg U.S. Aggregate Bond Index and NFI-ODCE Index; as of 4Q2025. "Risk" is represented by standard deviation.
Impact of Adding Private Real Estate
Even growth-focused portfolios can benefit from private real estate diversification. Allocations from 5-20% have historically provided meaningful volatility reduction while preserving over 94% of baseline returns, demonstrating that aggressive investors can enhance risk-adjusted performance without sacrificing growth objectives.
Risk Impact
13.50% (-0.71pp)
Return Impact
9.51% (-0.15pp)
Risk Impact
12.84% (-1.37pp)
Return Impact
9.36% (-0.30pp)
Risk Impact
12.22% (-1.99pp)
Return Impact
9.20% (-0.46pp)
Risk Impact
11.65% (-2.56pp)
Return Impact
9.04% (-0.62pp)
Index definitions
NCREIF Fund Index – Open End Diversified Core Equity Index (NFI-ODCE)
The NFI-ODCE Index includes open-end commingled funds pursuing a core investment strategy, primarily investing in private equity real estate. This is a quarterly, capitalization-weighted, gross-of-fee, time-weighted return index with an inception date of December 31, 1977.
NAREIT Equity REIT
NAREIT Equity REIT Index is an index designed to provide the most comprehensive assessment of overall industry performance and includes all tax-qualified real estate investment trusts (REITs) that are listed on the New York Stock Exchange, the NYSE AMEX Equities or the NASDAQ National Market List.
Bloomberg US Aggregate Bond Index
The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency).
Standard & Poor’s 500 Index (S&P 500)
The S&P 500 Index is a capitalization-weighted index of 500 large U.S. stocks. The index is designed to capture the returns of many different sectors of the U.S. economy. The total return calculation includes the price-plus-gross cash dividend return.
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Footnotes
- Investor: a person or company responsible for managing investments on behalf of a financial institution or its clients.