Tariffs, market volatility, interest-rate uncertainty and worries of a potential recession: In this marked “risk off” investment environment, financial advisers and their clients are seeking investments that may offer strong returns with potentially lower risk.

One solution: real estate debt. This growing asset class is emerging as a distinct investment option, providing stable income, downside risk aversion and diversification benefits. These investments present an attractive risk-adjusted return with conceivably higher yields than traditional fixed income and less volatility than equities. Even more important, real estate debt remains largely non-correlated with the stock market, making it a crucial portfolio diversifier.

A confluence of economic factors is driving this shift. Because of the turmoil in many sectors caused by COVID, inflation and the subsequent historic rise in interest rates, commercial real estate valuations have come down to earth; fundamentals