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Private Property

Private market investments tend to comprise illiquid assets that trade infrequently and may have lagged or smoothed valuations. The returns of these investments thus may behave quite differently than the contemporaneous returns of public market equivalents, which presents challenges to understanding the performance of the private markets.

The juxtaposition of the private US real estate NCREIF Property Index with the Dow Jones US Select REIT Index effectively demonstrates this distinction. Comparing longer-term quarterly returns for the two indices (see Exhibit 1, top panel) shows far more variation in the performance of publicly listed securities. The standard deviation of quarterly returns for the Dow index is 9.6%, more than four times as much as the NCREIF’s 2.1%.

Smoothing the returns of the REIT index (bottom panel), thereby potentially mimicking its private market counterpart, narrows the gap between the two. Replacing the quarterly observations for REITs with a three-year moving average shrinks the publicly traded index’s volatility so it is in line with the NCREIF index and more closely aligns the time series behavior. This is a reminder for investors to be cautious when interpreting correlations or Sharpe ratios measured with private market returns.

Quarterly real estate returns, December 1980–June 2023

Two line graphs shown. The first line graph shows returns for Quarterly Public Market versus Quarterly Private Market. Y axis shows percent, ranging from negative 30% to 30%. The Dow Jones US Select REIT Index shows high volatility, with positive returns as high as over 30% and negative returns as low as below negative 30%. The NCREIF Property Index shows low volatility, with returns mostly positive and under 10%. Line graph 2 shows the smoothed returns for Public Market versus Quarterly Private Market. Y axis shows percent, ranging from negative 10% to 10%. X axis shows years from 1980 to 2023. Smoothed Dow Jones US Select REIT Index returns show performance closely matching NCREIF Property Index, with positive performance between zero and 10% in most time periods. Periods of marked negative performance occurring around 1993, between 2005 and 2012, and around 2023.

Past performance is no guarantee of future results.

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.


Standard deviation: A measure of the variation or dispersion of a set of data points. Standard deviations are often used to quantify the historical return volatility of a security or portfolio.

Sharpe ratio: A ratio of return per unit of volatility.


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