The benefits of real estate in an inflationary environment – Advice Eating


Ramin Kamfar, founded Bluerock in 2002 and serves as the company’s CEO. He has over 30 years of experience in various aspects of real estate, mergers and acquisitions, private equity investing, investment banking, and public and private finance.


Russ Alan Prince: Bluerock celebrates its 20th anniversary this year. What is the driving factor(s) behind your success and how do you see Bluerock from here?


Ramin Kamfar: We founded Bluerock knowing that more than ever, individual investors must rely on their own abilities to manage and appropriately diversify their investment portfolios. With this in mind, we have worked over the past twenty years to build a diverse, alternative investment platform that is tailored to individual investors and helps solve many of the challenges they face today.

For example, for many years, the parents of baby boomers worked a significant portion of their careers for a large company and relied heavily on that company’s defined benefit plan for a significant portion—or even all—of their retirement savings. As defined benefit plans were phased out over the last few decades, individuals have been required to manage their savings in defined contribution plans such as 401Ks and Individual Retirement Accounts (IRAs).

Our investment solutions provide appropriate diversification beyond the traditional 60/40 portfolio, generate tax-efficient returns, reduce portfolio volatility and correlation with broader markets, and improve risk-adjusted returns. Our mission is to evolve and manage this growing range of investment programs to meet the demands of the ever-changing investment landscape.


prince: What are the benefits of investing in real estate in this environment of low yields and high inflation?


kamfar: In the current economic environment, institutional real estate has clear advantages over other asset classes. For example, unlike fixed income investments, the income component of many types of real estate can match or even exceed inflation. Economic growth, supply constraints and consumer demand can drive inflation or demand-pull inflation, which is currently the case.

For real estate, current income is higher than dividends from stocks and public REITs, as well as high-yield bonds, in line with recent historical averages. Strong growth drives demand for real estate, which also leads to higher rental growth and therefore higher values.

Second, higher inflation leads to higher construction costs, which limit new supply. This in turn increases rents as replacement costs rise. Real estate, therefore, tends to exhibit characteristics of both stocks and bonds, with growth characteristics of stocks and income-generating characteristics of bonds.


prince: Describe Bluerock’s investment philosophy and how your programs are designed to allow individuals to invest alongside the institutions and how you are able to generate meaningful returns.


kamfar: Bluerock’s investment philosophy is to identify asset classes that have historically produced strong returns with low volatility but have been unavailable to individual investors due to a lack of daily liquidity. The lack of access to these asset classes has significantly impacted the investment approach of individual investors compared to institutions that have depended on these asset classes to maximize diversification and generate income. This is not only due to the longer-term investment horizon of the institutions, but also to the high minimum investments that are typically required to invest in these attractive asset classes. These obstacles have made this type of investment unaffordable for most people.

To solve this problem, we continue to develop and structure investment programs that significantly reduce minimum investment requirements to just $1,000, provide more frequent liquidity opportunities, and truly empower individuals to invest alongside some of the most well-known and respected institutional investors. This investment approach is gaining traction as these types of programs receive increasing attention and capital from individuals seeking higher risk-to-return and low correlation to the stock and bond markets. In addition, we work with world-class sub-advisors with specific strategy execution expertise to deliver superior returns and add an additional layer of oversight and due diligence.


prince: Does Bluerock see alternative asset classes outside of real estate that could be attractive in the current market environment?


kamfar: In the high inflation and rising interest rate environment, investors are struggling to find compelling income options. At Bluerock, we are excited to have another historically institutional asset class that we are making available to retail investors. Senior secured loans, when invested through a secured loan obligation, offer opportunities for high single digit returns with variable interest rates that adjust to prevailing interest rates.

This is attractive given low interest rates that are not generating sufficient income and persistent and rising inflation that is hurting real returns. In addition, the investment structure can generate attractive risk-adjusted returns with low correlation to broader markets. We have been working to offer this asset class to retail investors in a ’40 Act vehicle.


Russ Alan Prince is managing director of private wealth Magazine and one of the foremost authorities on the private wealth industry. He advises family offices, wealthy, fast-moving entrepreneurs and selected professionals. Connect with him on LinkedIn.com.

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