BlackRock Doesn't Ignore Real Estate

Blackrock Inc. has a new investment report out today that focuses on equities, but reminds that real estate is a good place to park it.


Blackrock focuses the 20-page report is devoted to global equities analysis, and doesn't spend much space on fixed income. 

Still, Blackstone takes it as a given, and is closely paying attention. And it also has a clear worry about the future.

The report, which can be found HERE, recognizes the needs for diversification.  First, it notes, in a box near the top, "So What Do I Do With My Money? that "Infrastructure, real estate and other alternatives are real diversifiers—and offer attractive yields in a low-rate world."

Then, more directly, the report says,

Diversification is like insurance: You do not need it—until you need it. Consider alternative investments for 2014. Some are real diversifiers (at least in theory). We like market neutral funds and strategies focused on “hard” assets such as infrastructure. The downside (illiquidity) appears a fair price for uncorrelated returns in a low-growth world.

The report analyzes real estate financing trends, but only briefly, and at the end, leaves with a question.  It notes:A big risk of the Fed’s [quantitative easing] exit is the impact on the key but fickle housing market. [Referring to the Federal Reserve's slackening of its recent history of buying government securities to keep interest rates low.] The hike in mortgage rates caused by taper fears slowed down home sales and price gains—even though housing affordability remains near its highest level in decades. Housing starts are still 44% below their 1970–2008 average, data from the St. Louis [branch of the Federal Reserve Bank] show. The recovery has relied on investors chasing yield (first-time buyers are largely absent). And Fed purchases of mortgages in 2013 amounted to more than three times net issuance, according to Credit Suisse. What happens when the Fed exits [quantitative easing] in earnest? Imbalances just might tip over.

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