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Real Estate 1

Published date February 5, 2026
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Real estate is in many ways the easiest asset class to understand – it’s visible, tangible, and part of everyone’s daily experience. Under the surface, real estate encompasses a huge variety of assets and capital structures related to those assets.
These assets broadly fall under residential real estate (individually owned homes) and commercial real estate (pretty much everything else). Aside from residential mortgage-backed securities (RMBS), real estate as an investment asset class typically refers to commercial real estate and related strategies.

Strategy

Commercial real estate breaks down across several sectors:
  • •
    Multi-family (apartment buildings of any size)
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    Retail
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    Office
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    Hotels and hospitality
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    Industrial (examples include warehouses, factories, storage facilities, distribution centers, and data centers)
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    Mixed-use (some combination of real estate types)
    • There are also niche categories, including: senior housing, student housing, affordable housing, biotech/life sciences facilities, etc.
    Commercial real estate, much like personal residential real estate, is purchased with a combination of debt and equity. Just as there is a variety of real estate sectors, there is a variety of real estate debt and equity strategies.
    Real estate equity investment strategies can have a range of risk and return profiles, including:
  • •
    Opportunistic (higher risk, focused on capital appreciation): includes ground-up development or significant property turnarounds
  • •
    Value-add (medium risk, mix of income and capital appreciation): properties require operational improvements, including renovations and lease-up strategies
  • •
    Core and core-plus (lower risk, focused on income): high quality properties with no or few operational requirements, high occupancy, and consistent contractual income from long-term leases
    • Opportunistic and value-add real estate equity strategies are typically offered through private equity real estate funds. Core and core-plus, and occasionally value-add, are typically offered through real estate investment trusts (REITs). REITs can be private or public – individual investors tend to be most familiar with public REITs, which are publicly traded stocks.
    Real estate debt strategies include both publicly traded structured debt (commercial mortgage-backed securities / CMBS) and private debt strategies. Real estate debt strategies can also run the gamut from a risk perspective, from loan-to-own to first mortgages.

    Role in the Fund's Portfolio

    Real estate is expected to be a diversifying asset within the Fund's overall portfolio. Note that when we refer to real estate, we mean specifically private real estate funds and private REITs. In our CIO's experience, publicly traded REITs have exhibited higher correlation with public equities and have not provided strong diversification benefits.
    Real estate can also provide a degree of inflation protection, as leased assets often include rent escalation clauses in line with inflation expectations.

    Our Portfolio

    In our CIO's view, commercial real estate is in a tricky place at the moment. The market dynamics and outlook can be vastly different depending on the investment sector, geography, and strategy. In broad strokes, industrial property is benefiting from ongoing tailwinds and retail is recovering from recent lows, while office is challenged and multi-family is fully priced.
    In this environment, depth of experience is critical. The Fund is invested with an established real estate manager that has been executing the same strategy since 20092. The portfolio is diversified across U.S. regions, with a strong tilt toward industrial properties along with certain essential retail assets.
    As diversification relative to equities is a key reason the Fund invests in real estate, this investment is income-oriented. This private REIT pursues a triple net lease strategy, and the tenants are almost exclusively large investment-grade companies.3
    Although not guaranteed, the investment manager also seeks to designate distributions as return of capital where possible, improving the tax-efficiency of the investment income.
    1 The Fund may purchase private real estate funds and real estate investment trusts (REITs), real estate equity or debt and therefore may be subject to risks similar to those associated with direct investment in real property. The Fund may not purchase or sell real estate or interests in real estate.
    2 The Fund's holdings are subject to change without notice.
    3 A triple net lease property is one in which the tenant is responsible for the taxes, insurance, and maintenance of a property throughout the life of the lease. Triple net lease properties often start as sale-leaseback transactions, in which a company seeks to raise capital by selling a real estate asset and then renting it back as a tenant.
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    The Institutional Investment Strategy Fund ("IISF" or "Fund") is an investment company registered under the Investment Company Act of 1940. IISF is a closed-end fund operating as an interval fund that makes quarterly repurchase offers and as such provides limited liquidity. The fund commenced operations on March 5, 2024. An investor should consider the investment objective, risks, charges and expenses of an investment. The Prospectus contains this and other information. Read it carefully before investing.