In this video, Michael Southern, Portfolio Manager, explains how Newport invests in private real estate and why the asset class plays an important role in client portfolios.
Newport has been investing in real estate for decades and today manages approximately $500 million in privately held real estate on behalf of clients. Southern discusses how stabilized, income-producing properties can provide cash flow, long-term appreciation, inflation protection and portfolio stability, particularly during periods of volatility in public markets.
Transcript
I’m Michael Southern, a Portfolio Manager at Newport Private Wealth.
In this video, I’ll be talking about how we invest in real estate and the important role it plays in client investment portfolios.
Newport has been successfully investing in the asset class for decades. Today, we manage approximately $500 million in privately held real estate on behalf of our clients.
At roughly 10% of a typical client portfolio, real estate is a cornerstone of our investment offering. While we provide access to real estate across various geographies, property types and stages of development, the bulk of our real estate exposure is to multifamily residential properties in North America.
The role that stabilized, income-producing real estate plays in client portfolios is twofold. First, it can provide attractive cash flow yields through rental income. Second, it can generate long-term value through capital appreciation as property values increase over time.
Real estate can also act as an inflation hedge. If prices in the broader economy start to move higher, rents will often move up as well.
When equity markets are under pressure, people still need a place to live and continue to pay rent. That ongoing demand helps real estate provide stability during periods of higher volatility in public markets.
When we invest in real estate, we are primarily looking for properties where there is an opportunity to improve property management services, or where the physical structure has not been adequately maintained. As a result, these properties often have below-market rental income or higher vacancy rates, giving our managers room to add value through operational or physical improvements.
We also selectively invest in opportunities that provide the flexibility to either exit at key milestones or hold for long-term income potential.
While we have seen the benefits of real estate play out over various market cycles, one of the best examples of its role in client portfolios was in 2022. While stock and bond markets were selling off and experiencing double-digit drawdowns, real estate held its own, delivering positive double-digit returns.
This diversification ultimately helps Newport protect client capital during challenging periods.
As a cornerstone of our philosophy at Newport, we believe alternative investments can help diversify a portfolio. Let us show you how.
