Editor’s note: Do you have feedback on how we can improve our communications, or an idea for a new feature you’d love to see in your dashboard? Take a moment to share your thoughts.
If you’ve logged in to your Fundrise account within the last couple of days, you may have noticed that certain parts of your dashboard look different, including your portfolio chart and the various representations of your individual real estate projects.
At Fundrise, we believe that a key part of providing a better investment experience is continuously working to improve the software tools and communication we provide, in an effort to make you a more informed investor and give you a clearer picture of how we’re investing your money. To that end, we’d like to share a few updates.
Your portfolio is now organized by real estate strategy
If you’ve been investing with us for a while, you are likely somewhat familiar with the “Fundrise rating”, a framework we designed to convey the relative risk-return expectations of individual real estate investments. While not a measure of investment quality, this framework took the many various data points that make up our investment analysis and simplified them down into a few key attributes that translated into a letter rating ranging from A to F (with A representing a lower expected risk-return profile and F representing a higher one).
While a useful tool based on its original intended purpose, we came to feel that the Fundrise rating was limited, particularly as the platform has continued to grow. In 2014, when we developed the rating, the main way to invest on the platform was to choose between a limited number of existing, individual real estate opportunities (all generally within a similar debt or debt-like preferred investment structure).
Today, however, both the overall Fundrise investor community and our real estate portfolio has become ever more diversified (as of this writing, we have more than 225 active investments across 16 states, and more than 150,000 individual investors). Additionally, most of these investors are investing for the long term, with the majority of the assets that a typical investor may own over their time with us having yet to be acquired.
As a result, it became clear to us that organizing investments by the real estate strategy within which they fall would be a more intuitive and effective way to communicate the intent behind the investments we’re making, and how those investments relate to your expected outcomes.
If you work in the real estate industry or have prior experience with private real estate investments, then these strategies will likely be familiar; however, there’s no universally agreed-upon standard as to what specifically delineates the cut off of what is or isn’t included in certain strategies: the value lies in providing an overall organizing principle.
In order to help you better understand how to interpret these strategies as they relate to your portfolio, here’s a more detailed description of each (Note that this is meant to be an overview of private real estate investing strategies as a general concept, and is not meant to represent the performance of a particular Fundrise investment, all investments involve risk and there are no guarantees of any returns):
How real estate strategies relate to your objectives
In other words, the strategies we employ represent the “how” behind the “what” you want to achieve as an investor, whether that is focusing on earning consistent income, long-term growth, or a more balanced approach.
Generally speaking, investors focused on income should expect to have more of their portfolio weighted toward Fixed Income and Core Plus strategies, growth focused investors would tend to be more allocated towards Value Add and Opportunistic strategies, and those seeking a more balanced return profile will likely be somewhere in between. However, we believe that diversification is critical, so you will likely see a small percentage of your portfolio allocated to strategies that may seem to sit “outside” your intended objective.
Again, it’s important to remember that your Fundrise portfolio is constantly growing and evolving as we continually acquire new assets on your behalf, and existing projects in your portfolio complete their business plans and pay back. Generally speaking, your portfolio is likely to get more diverse the longer you remain invested. Therefore, it’s expected that your portfolio’s weighting across strategies will change over time and there is no such thing as a “correct” allocation, the way you might think about a portfolio of publicly traded investments (e.g. 70% stocks and 30% bonds).
To provide a timely example, the current interest rate environment, where rates are at or near historic lows, has driven down yields on Fixed Income (i.e. debt and similar preferred structure) investments. In many cases, we believe a Core Plus strategy (i.e. ownership of stabilized, cash flowing real estate with some upside potential) represents a better overall risk-adjusted return in this environment while still generating attractive yields, and accordingly, we may shift a greater share of our deployment into this strategy for the time being.
Constantly incorporating new information into our thinking and re-evaluating our strategy in an effort to get the best outcome for you as an investor is one of the key things that makes Fundrise different from other investments you may be used to owning, which often blindly conform to a “model portfolio”, even when some of the allocations do not make sense given what is going on in the real world.
A note about return projections for individual projects
Going forward, in most cases we will no longer publish asset-level projected returns for each new real estate project that we acquire. Instead, we intend to focus more of our communication on that project’s strategy as a general framework for the return profile we are seeking to achieve. Ultimately, as we have added more and more assets to the broader Fundrise portfolio, the returns for any one single asset have an ever-decreasing impact on overall performance, so these projections have become less and less useful over time as a handle for both expectation-setting and evaluating our effectiveness as managers: what matters is how our strategies are performing as a whole and how that translates to the results we aim to achieve for you.
For existing projects that have published projected returns, investors will still be able to refer to them by navigating to the “Key facts” section of the detail view for that project (example here), and we plan to continue to share the realized return for each completed project.
Onward.
————
P.S. — As always, we want to hear from you. Do you have feedback on how we can improve our communications, or an idea for a new feature you’d love to see in your dashboard? Take a moment to share your thoughts using the quick feedback form, or email us at investments@fundrise.com.
