From a small northwestern observatory…

Not a bad month, as all things go, and certain a great month to own the S&P. With that in mind, the real estate sector continues to “figure out” what the post-pandemic world will look like. After two “down” months, ACCRE rebounded nicely in April, although we’re still behind the S&P both on a single-month basis and cumulatively. Nonetheless, some of our metrics (particularly diversification) make us continue to stay the course. So, on with the report…

As shown, a dollar invested in ACCRE at the inception (four years ago) would be worth $1.56 today. For most of the last four years, ACCRE has handily beaten the S&P, but the strong bull market for the past year has really turned that around. Conversely, the S&P Real Estate index languished for most of the last four years, but has performed nicely in the last 12 months.

One of our main goals with ACCRE is to provided positive-return diversification with a fairly low-risk portfolio. Most months, we demonstrate this with a Sharpe Ratio — this is a measure of the average daily excess return (fund return minus the T-Bill return) divided by the standard deviation of those returns. In short, it tells us how much return we are buying proportional to the risk we are taking. A higher Sharpe Ratio means we’re doing well, and if our Sharpe Ratio consistently beats the S&P, it means we’re providing more return than the market as a whole relative to the risk we’re taking.

The Sharpes Ratios are calculated for the life of the fund, as is the overall correlation. Most months, ACCRE beats the S&P, but as we all know, the S&P has been on a very real bull tear this past year. Certainly, we all hope that continues! The overall correlation (life of the fund) is just where we want it, but the correlation for April, while positive, is surprisingly low. Digging into the data a bit further, we find that the S&P, while doing great, nonetheless had some bounces during the month. ACCRE, on the other hand played the “slow and steady wins the race” game.

We may reconsider some of our positions this month, and of course our subscribers will get immediate notification of any trades. In the meantime, if I can answer any questions about REITs or Real Estate Finance in general, please don’t hesitate to reach out.

John A. Kilpatrick, Ph.D. — john@greenfieldadvisors.com