- Bluerock’s Total Income + Real Estate Fund has generated high risk-adjusted returns in the past decade.
- High inflation has prompted investors to search for real assets, which have historically been strong hedges.
- The strategist shares three major real estate sub-sectors to invest in with rising inflation.
Investors chasing stunning gains in speculative stocks and cryptocurrencies will likely be disappointed in 2022 as risky assets continue to sell off.
Perhaps it would be better for them to pursue steady, steady gains – the kind that Bluerock Total Income + Real Estate Fund has consistently produced in the past decade.
The fund is up 10% this year — on track to surpass the 9% annual gains it averaged in its lifetime — while the S&P 500 is down about 13% year-to-date.
The publicly traded interval fund has closed in the green every year since its inception in 2012 and – amazingly – has recorded only three losing quarters in that period, out of a possible 37. It has had annual returns of 1.4% to 21.6% and has only returned less than 6% a year once, according to Morningstar.
What’s even more impressive than those returns is that the team at Bluerock Capital Markets that runs the fund has been able to hit those benchmarks without taking too much risk.
An analysis of the Bluerock fund and 6,138 competing open funds, closed-end funds, and exchange-traded funds conducted by Bluerock using data from Morningstar Direct (then reviewed by Insider) found that the Bluerock Fund had the highest Sharpe and Sortino ratios — two metrics designed to measure risk-adjusted returns — since That started trading on October 22, 2012.
Miguel Sosa, a research strategist at Bluerock who works on the investment product, gave Insider some insights into how the Bluerock Total Income + Real Estate Fund could make it happen.
“The natural question we get is: How did you deliver these proceeds?” Sosa told Insider in a recent interview. “In a nutshell for you, it’s three main pillars.”
Those pillars, Sousa said, are private real estate, the asset class in which the fund is investing and which Sosa described as “extremely stable” and “highly growth-oriented”; Sub-advisors with whom the company collaborates to develop its strategies; Active asset management carefully.
High inflation means high real estate returns
Although retail investors do not have easy access to the private real estate markets and institutional funds that Bluerock can access, Sosa said there are still ways to learn about the three sub-sectors of real estate that make up large parts of Bluerock Total Income + Real Estate Fund . .
Sosa said he thinks real estate is an especially smart investment right now, given that abnormally high inflation has some experts worried about another recession.
Four decades of high inflation is one of the most compelling motivators for the real estate sector, rising 16.4% in the past 12 months, while the S&P 500 barely breaks even.
“Real estate, historically, has been a very good way to hedge against inflation,” Sosa said. “That’s because it’s a real asset after all, and it’s an asset of limited supply by nature. You can’t create new land; you can’t create desirable land. The demand for it continues to grow over time.”
Sosa continued, “If you’re a long-term investor – especially during times of inflation – again, historically, if we look at periods of high inflation, like the late ’70s, early ’80s, and ’90s, real estate has performed strongly.”
Sosa said that while there is evidence that inflation is beginning to peak — such as lower car and energy prices — and should slow further in coming years as supply chain issues are resolved, high prices are likely to persist for at least the next year. or two.
How to invest in real estate during periods of high inflation
Investors can obtain inflation protection through real estate investment trusts, or REITs, in the following three real estate sub-sectors: ArtificialAnd residentialAnd Life science.
Sosa said the property’s industrial sub-sector, which includes warehouses and fulfillment centers, has been a hit but is still benefiting from the watershed transformation accelerated by the pandemic. He said distribution chains have been disrupted with the development of three main trends: the decline of traditional stores, the boom of e-commerce, and the emergence of two-day, one-day and even same-day delivery of goods purchased via the Internet.
Sosa said that as online order fulfillment has become more difficult and competitive, companies have become more efficient by creating several smaller shipping centers instead of having one huge one. More warehouse space is required than ever before, which should boost REITs into the space.
“Existing repositories are no longer suitable for this online presence,” Sosa said.
Sosa said the residential sector has also taken off as the mismatch between supply and demand has sent home and apartment prices skyrocketing. He added that since the financial crisis, the supply of homes has not kept pace with demand as the US population has increased, and the pandemic has moved millions of people – especially out of cities.
Multi-family residential REITs are Bluerock’s preferred way to play the trend, Sosa said, adding that properties in the Sun Belt are particularly attractive due to the area’s lower cost of living and higher number of jobs compared to cities in other parts of the country. Another incentive for this sub-sector is that higher real wage growth must continue to support higher rent payments.
Finally, Sosa said he is excited about the real estate sub-sector in the life sciences, in large part due to the huge mismatch between supply and demand.
Sosa said the demand for new, life-saving and life-improving drugs is stronger than ever, and job opportunities in the biotechnology and pharmaceutical industries are strong. Building the labs used by those companies can be a challenge due to specific water, ventilation and structural requirements, Sosa said, so labs tend to be concentrated in certain areas.
“You can’t just take your normal office complex and turn it into a biotech hub,” Sosa said.
The strategist continued, “These types of very specific constraints limit real estate developers who can create or transform a life sciences complex for a life sciences tenant. This – and only the strong demand we see for novel treatments – really gives developers and property owners the upper hand in the life sciences sector.”
Investors who aim to learn about those three sub-sectors of real estate can invest in the Bluerock Total Income + Real Estate Fund, which focuses on private markets, target stocks in REITs, or ETFs composed of REITs, in those industries. Note that the following list of ETFs and stocks was compiled by Insider and is not an investment recommendation from Sosa.
For focused exposure to the industrial sub-sector, investors may consider the Pacer Benchmark Industrial Real Estate SCTR. The best way to get direct exposure to the residential sub-sector is the iShares Residential and Multisector Real Estate ETF. and
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Connected as well as any sub-sector in the life sciences is Alexandria Real Estate Stock Company.
