REIT sales tank, BDCs roll at start of 2024: Report
With clouds looming over the commercial real estate market, sales of non-traded real estate investment trusts started 2024 with a downturn, as widely expected, with last month’s non-traded REIT fundraising and sales by financial advisors down 47% compared to January 2023, according to new research by Robert A. Stanger & Co. Inc., which tracks sales of illiquid alternative assets.
On the other hand, sales and fundraising for non-traded business development companies, which raise money from investors to buy higher-yielding private company loans, continued their steady pace, with BDCs generating $2.5 billion in sales last month, according to Stanger, which says BDC fundraising has surpassed $2 billion each month since September.
Financial advisors’ clients are turning to BDCs and other alternative investments such as interval funds instead of real estate for better yields, industry observers said.
“The BDC market is in favor right now as an asset class,” said John Cox, CEO of Cox Capital Partners, which invests in non-traded alternatives in the secondary market via a proprietary fund. “Across all the various product structures, the BDCs as an asset class are having a resurgence. The market used to be a few non-traded BDCs but it’s now much more numerous.”
BDCs blend attributes of publicly traded companies and closed-end funds, giving holders exposure to high-yielding, private equity-like investments. As a result of those higher yields, however, BDCs also tend to carry additional risk and can sell off quickly.
Traded BDCs posted strong performance last year, with the S&P 500 BDC Total Return Index increasing by 27.6%, with about half of that return coming from capital appreciation.
“Retail investors continue to revise
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