Investor Resources

The purpose of the fund approach is to be diversified and spread out risk. There are specialized funds that may concentrate on one asset type. For example, a self-storage fund or a multi-family fund are specialized funds with the theory that specialization gives the operators an advantage in recognizing value-add strategies and operational expertise. In a fund that has the same asset type, there's still a level of diversification with different locations sharing cash flow in a centralized fund vehicle. 

There are pros and cons to all types of investments, one pro of this type of investment is that the managers may be very specialized and have a high level of knowledge in that one asset type. They may concentrate on putting all their efforts into value add strategies and improvements on that one asset type. That accelerates the learning curve on that asset because it's very specialized.

A negative of that could be a change in the market related to that asset type. A real-life case was a very niche fund, made up of triple-net restaurants of one particular corporate brand. All they did was buy a very specific triple-net restaurant brand. The Corporation had problems, and they ended up closing a number of locations and that fund suffered.

Many multi-family funds were worried during Covid because there were moratoriums on rent. Without government bailouts and PPP loans, many funds could have been shut down over an event like that.

Another type of fund that has greater diversification is a blind pool fund. A blind pool is putting your faith in the managers or sponsors of that fund, they're making decisions about where to place invested capital. In the fund PPM it should state what assets are being targeted and what type of diversification is being strategized for. 

You just have to read the fund documents to understand what assets they're able to invest in. The main benefit of an open blind pool fund is that they can really take advantage of diversification, not only in asset type but geographic regions. 

In our opinion, true diversification offers greater security in investing in real estate.