My son’s birthday is approaching, and I got to thinking about giving and receiving presents. It’s a great concept; for doing nothing except being there on a given day people offer you gifts. Sometimes people offer gifts that may not necessarily be appropriate for the child.

It’s not dissimilar to what some general partners (GPs) do with their limited partners (LPs) in real estate. They offer unwarranted presents in that opportunistic GPs continue to promise returns in the 17 percent to 18 percent gross range for investments in the developed markets, including the United States. Value-add GPs have not materially decreased their return expectations either. They continue to offer return expectations in the 13 percent gross range. All of this has happened even though the risk-free rate of return has declined by more than 400 basis points since the beginning of the Great Recession.

Why have investors not recalibrate