Mirror Images: Tracking 2 Decades of Private Credit and Real Estate Investing

When comparing two sets of data in private markets—whether divided by styles, geographies, or vintages—we often highlight the contrast between the two, or how they diverge in different market environments. However, it can also be insightful when two investment styles closely track each other over long stretches of time, as is the case in this month’s article looking at credit and real estate markets.

We compare the commitments into these funds in the most developed markets of North America, Western Europe, and global from 2000 to 2022, to see how the two strategies track through many different economic cycles.

Key Takeaways

The immediate takeaway is how closely the two strategies have aligned for nearly the entirety of the past two decades. Aside from a notable divergence in 2016, with credit receiving $14 billion more in commitments, both styles remained within $4 billion of each other in that timespan.

While both markets have closely mirrored each other, real estate is usually the preferred vehicle given it has received higher commitments than credit in 14 of the 22 years. Real estate commitments bottomed out as one might expect during the financial/mortgage crisis at the end of the 2000s, but otherwise our analysis backs up the idea that real estate is a larger and steadier market in private investing.

One aspect of these strategies to consider more closely is that they share a common area of investment. The credit-real estate focus in our Cobalt dataset highlights the shared deals in which credit and real estate investors may find themselves.

Looking Ahead

Although 2022 was chosen as the cutoff for the chart, early results point to a continued trend with commitments in all years 2023-2025 are currently within $300 million of each other. While much of the data is still outstanding for these years, both styles should closely mirror each other for the foreseeable future.

With 20+ years of data to rely on, this can be considered a strong trend that should hold regardless of changing economic factors such as interest rates or inflation, for example.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.