Opportunity

Why private real estate

Low correlation to U.S. stocks makes it an effective portfolio diversifier and attractive inflation hedging income compliments traditional fixed income.

Private real estate dominates the U.S. market

Private real estate represents 89% of the $13.1 trillion real estate market.

U.S. Commercial Real Estate Market Total Capitalization

$11.7 trillion

Private real estate

$1.4 trillion

Publicly traded REITs

Source: Securities Industry and Financial Markets Association, CBRE, NAREIT, Clarion Partners Global Research, annual data and estimates as of Q4 2024. U.S. commercial real estate includes private and public equity investments. Numbers may not sum due to rounding.
Private Real Estate includes the estimated value of all privately held Real Estate. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results.

Why invest in private real estate: potential benefits

Real estate can provide strong current income vs. other investment vehicles

10-Year Yield Average (%)

Chart

Bar chart with 4 data series.
The chart has 1 X axis displaying categories.
The chart has 1 Y axis displaying values. Data ranges from 1.71 to 4.07.
End of interactive chart.

For 10-year period ended 2Q 2025.

Source: Clarion Partners Investment Research, NCREIF, REIT.com, S&P, Bloomberg, 2Q 2025. Please note: NFI-ODCE is using the trailing 12-month income return, NAREIT All Equity REITs and S&P 500 are using 12-month dividend yield, and Bloomberg US Aggregate Bond Index is using yield to worst. 10-Year Avg., is calculated based on historical trailing 12-month income return/dividend yield as of Q2.

For NAREIT All Equity Dividend Yield, please use the dividend Yield on REIT.com

 https://www.reit.com/data-research/reit-indexes/monthly-index-values-returns 

Explore how private real estate can impact a portfolio

Analyze the effect of adding private real estate to a portfolio of U.S. stocks and bonds.

STEP 1

Select a portfolio mix of stocks and bonds
20% Stocks80% Bonds
40% Stocks60% Bonds
60% Stocks40% Bonds
80% Stocks20% Bonds

STEP 2

Adjust hypothetical portfolio allocation
0%
5%
10%
15%
20%

Chart

Bar chart with 2 data series.
The chart has 1 X axis displaying categories.
The chart has 1 Y axis displaying values. Data ranges from 4.25 to 5.67.
End of interactive chart.

For illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Diversification does not assure a profit or protect against market loss. All investments involve risk, including loss of principal. Past performance is no guarantee of future results.

Stock, bonds and private real estate are respectively represented by the S&P 500 Index, Bloomberg U.S. Aggregate Bond Index and NFI-ODCE Index; as of 2Q2025.

A useful complement to equities

Private real estate and publicly traded REITs are quite different from an investment standpoint, exhibiting varying levels of volatility and patterns of return. Private real estate has historically offered lower correlation to U.S. stocks than publicly traded REITs, making it a more effective portfolio diversifier.

How they differ:
Abstract graphic

Private real estate

  • Investors^ make a direct investment in property
  • Property is managed directly or through a third-party property manager
  • Historically lower volatility than publicly traded REITs
Abstract graphic

Publicly traded REITs

  • Investor^ makes indirect investment via shares of a publicly listed real estate company
  • Property is operated/managed via that public company
  • Historically higher volatility than private real estate

Private real estate has historically been negatively correlated to U.S. equities versus Publicly Traded REITs

Real estate correlations vs. S&P 500 Index

Chart

Chart with 2 data series. Columnrange charts are column charts displaying a range between a lower and higher value for each point.
The chart has 1 X axis displaying values. Data ranges from -0.5 to 0.5.
The chart has 1 Y axis displaying values. Data ranges from -0.3 to 0.76.
End of interactive chart.

Source: Clarion Partners Investment Research, NCREIF, Bloomberg, REIT.com, 1Q 2025.

Property types

Real estate market dynamics are influenced by many factors - demographics, location, property type, economic conditions and more - presenting opportunities for specialized managers with expertise and resources.

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Retail*

Stores, malls

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 4.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

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Office*

Traditional workspace, medical lab

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 2.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

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Warehouse*

Distribution centers, manufacturing, showrooms

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 7.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

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Apartment*

Multifamily residential complexes

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 1.0% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

undefined

Retail*

Stores, malls

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 4.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

undefined

Office*

Traditional workspace, medical lab

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 2.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

undefined

Warehouse*

Distribution centers, manufacturing, showrooms

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 7.5% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

undefined

Apartment*

Multifamily residential complexes

*Source: Clarion Partners. Data as of March 31, 2024. This investment represents 1.0% of relative percentage of the holding of the entire portfolio (100%). Characteristics and holding weightings are based on total portfolio, are subject to change at any time, and are provided for informational purposes only. Not to be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable.

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^ Investor: a person or company responsible for managing investments on behalf of a financial institution or its clients.

Index definitions

NCREIF Fund Index – Open End Diversified Core Equity Index (NFI-ODCE)

The NFI-ODCE Index includes open-end commingled funds pursuing a core investment strategy, primarily investing in private equity real estate. This is a quarterly, capitalization-weighted, gross-of-fee, time-weighted return index with an inception date of December 31, 1977.

NAREIT Equity REIT

NAREIT Equity REIT Index is an index designed to provide the most comprehensive assessment of overall industry performance and includes all tax-qualified real estate investment trusts (REITs) that are listed on the New York Stock Exchange, the NYSE AMEX Equities or the NASDAQ National Market List.

Bloomberg US Aggregate Bond Index

The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency).

Standard & Poor’s 500 Index (S&P 500)

The S&P 500 Index is a capitalization-weighted index of 500 large U.S. stocks. The index is designed to capture the returns of many different sectors of the U.S. economy. The total return calculation includes the price-plus-gross cash dividend return.

Important Information

Most funds offer multiple share classes. Share classes are subject to different fees and expenses, which will affect their performance.

Certain share classes are only offered to eligible investors as stated in the prospectus. Different minimums may apply to clients of certain service agents. All classes of shares are not available through all distribution channels. See the Fund's prospectus for additional information.

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Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

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Investors should carefully consider a fund's investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.

Franklin Distributors, LLC. Member FINRA/SIPC. All entities mentioned are Franklin Templeton affiliates companies. Prior to July 7, 2021, Franklin Templeton Distributors, Inc., and Legg Mason Investor Services, LLC served as mutual fund distributors for Franklin Templeton. Investment Products: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE. Reports and other information about the fund are available on the EDGAR Database on the SEC's Internet site at www.sec.gov.

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