When the stock market swings wildly—whether due to inflation fears, geopolitical tensions, or recession whispers—investors often find themselves trapped in a cycle of anxiety. A single headline can erase months of gains overnight.
Yet, while equity markets ride the rollercoaster, real estate debt funds have quietly delivered consistent, predictable returns, offering a safe harbor when the seas get rough.
If you’re seeking stable returns in uncertain markets, it may be time to understand why private credit backed by real estate is outperforming the traditional stock play.
A real estate debt fund pools investor capital to issue loans secured by hard assets and/or income-producing properties—think fixer-uppers, flips, multifamily buildings, commercial centers, and development projects. Instead of owning the property directly, you act as the lender, earning interest payments.
Here’s how they work:
This structure offers a fixed-income profile—often 8–12% annualized returns—without the daily price swings of public equities.
While dividend yields on the S&P 500 hover around 1.5%–2%, many real estate debt funds target 8–12% annual yields. Because payments are contractual, your income isn’t tied to corporate earnings or share price performance.
Unlike unsecured corporate bonds or equities, loans in real estate debt funds are backed by tangible assets. If a borrower defaults, the fund can take possession of the property—providing an added layer of downside protection.
During market downturns, stock portfolios may move in the same downward direction. Private credit investing, especially in real estate, tends to have a low correlation with the S&P 500—helping smooth portfolio volatility.
2008 Financial Crisis:
While property owners saw asset values fall, senior debt investors who held properly underwritten loans with conservative loan-to-value (LTV) ratios largely preserved their capital.
2020 Pandemic Shock:
The S&P 500 fell over 30% in just weeks. Many real estate debt funds maintained stable interest payments, as borrowers prioritized keeping loans current to avoid foreclosure.
Historical Data Point:
According to Preqin, private debt strategies (including real estate debt) have delivered annualized returns of 8–10% over the past decade, with significantly lower volatility than public equities.
This asset class is particularly suited for:
With interest rates elevated and public markets unpredictable, the opportunity for private credit investing—especially in real estate—has never been more compelling. Current market conditions favor lenders, with higher yields and stronger borrower covenants than in previous years.
In a world where the stock market can plummet in days, real estate debt funds offer something increasingly rare: predictable, collateral-backed returns with resilience in the face of volatility.
Learn how to diversify with real estate debt funds—download our free guide and see how 890 Capital can help you secure consistent income in turbulent markets.
Your Turn: If volatility persists, would you shift part of your portfolio into real estate debt funds for stability? Share your thoughts below.
