Institutional investors may want to reconsider the role of real estate debt within their portfolios as higher borrowing costs challenge the return assumptions underlying value-add and opportunistic equity strategies, according to a new analysis by Manoj Vasudevan.
In the analysis published on LinkedIn, Vasudevan examined Cambridge benchmark data covering 565 opportunistic real estate funds spanning more than 20 years. The pooled return across the funds was 5 percent, while the median fund returned 6.8 percent and the top-quartile fund returned 12.1 percent — below the roughly 15 percent net return typically associated with opportunistic strategies.
Vasudevan argued that much of the historical return target for value-add and opportunistic investments depended on leverage rather than underlying property-level returns, an equation that has become more di
