With recessionary fears increasing and investors pouring record amounts of cash into risk-free alternatives, Chicago-based real estate fund manager Origin Investments completed an analysis showing that private real estate investments typically produced greater returns than money market funds, high-yield savings accounts and short-term Treasury notes over seven- and 10-year holding periods in the last three major recessions.
During the first quarter of 2023, retail investors added $196 billion to money market funds. That level of investment, according to the Wall Street Journal and the Investment Company Institute, is higher than at any time since at least 2007. And it may continue, given the increasing likelihood of a recession—which Origin Investments has predicted to occur by October and which the Federal Reserve agrees is increasingly likely.
But according to Origin Investments, the flood of new capital into risk-free alternatives may be a short-sighted reaction given that average returns for those investments (4%) don’t match inflation (5% in March) or the seven- and 10-year average annualized returns generated by private real estate during the three most recent major recessions. Those economic cycles included the early 1990s, the dot-com bubble burst and the Global Financial Crisis (GFC). Origin did not include the short, COVID-induced recession in March of 2020.
“Recent trends demonstrate that many investors have found the flight to safety to be a more attractive strategy than any risk-exposed asset classes such as private real estate or public equities, despite risk-free returns that don’t even match the rate of inflation,” said Vince DeCrow, Vice President of Origin Investments. “Yet historical data, when looking at private real estate over seven- and 10-year horizons, reveals that real estate has produced greater returns; sometimes much better.”
Origin Investments’ analysis, which calculated historical returns based on data from the National Council of Real Estate Investment Fiduciaries (NCREIF) and the U.S. Department of the Treasury, found:
· Since January 1990, the annualized return of rolling two-year Treasury notes was 3.24% versus 7.6% for the National Council of Real Estate Investment Fiduciaries Open Ended Diversified Core Equity Index Fund (NCREIF-ODCE), a standard industry benchmark.
· In the last three recessions, the seven-year, cumulative returns for private real estate investments exceeded those of rolling two-year Treasury notes during the dot-com bubble burst and the GFC. Over the three seven-year periods that included recessions, private real estate generated a 5.9% annualized return versus a 3.8% annualized return for Treasuries.

· Extending the holding period from seven to 10 years increased the returns and proved to be more lucrative for private real estate in all three recessionary periods—in some cases by a considerable margin—producing a 5.6% annualized return versus a 3.5% annualized return for Treasuries.

“There is no question that given current economic conditions, a risk-free investment with a +/- 4% return could be considered attractive,” DeCrow said.
Origin’s analysis concluded that there is no single economic condition that will signal the all-clear when it’s worthwhile to pivot back to a “risk-on” approach. Instead, risk tolerance, financial goals and investing acumen are among the external economic factors and myriad personal criteria shaping the placement of investment capital.
DeCrow added that attempting to “time the market” is a strategy that typically doesn’t work for most investors and more often than not results in substantial opportunity cost.
Origin Investments helps high-net-worth investors, family offices and clients of registered investment advisers protect and grow their wealth by providing tax-efficient real estate solutions. Since its founding in 2007, Origin has executed more than $2.8 billion in real estate transactions and is currently accepting new investors for the open IncomePlus Fund. It is also accepting investors for its open Strategic Credit Fund through its affiliate firm, Origin Credit Advisers. To learn more, visit www.origininvestments.com.