Weigh risk and return across private property strategies and against other assets in a strategic allocation

Moving from core to core-plus, value-added and opportunistic strategies adds leverage, leasing and development risk, and a growing share of return from appreciation rather than income. Real estate's expected return and risk sit between those of bonds and equities. Private property looks less volatile than REITs because appraisals smooth it, but the two tend to converge over long horizons. Its portfolio role is income, diversification and partial inflation protection. The size of the allocation should reflect leverage, illiquidity, concentration in a few large assets and the denominator effect. Justify the strategy mix by the client's return target and liquidity needs. The trap is comparing smoothed private volatility directly with listed REIT volatility and concluding that private property is safer.