The unprecedented volatility in private real estate, and all asset classes, during the past several years has sparked a great deal of interest in investment strategies that can help to insulate portfolios against violent swings in the market. For investors in private real estate, the simple and obvious solution is to forgo debt altogether, regardless of how attractive borrowing costs and terms might be. But as the steep decline in the unleveraged NCREIF Property Index (NPI) demonstrates quite clearly, a zero leverage strategy is an imperfect solution, and such a strategy may produce results that are inferior to a prudently leveraged portfolio in terms of both risk and returns.

A more effective approach for investors seeking core real estate performance — i.e., modest long-term total returns, say 6 percent to 8 percent, dominated by stable income returns — would be to use the disti