Investor Resources

Public market volatility can create uncertainty for professionals whose retirement accounts, brokerage portfolios, employer stock, and compensation are closely connected to publicly traded assets.

However, periods of volatility do not necessarily mean investors should sell their investments or move away from the stock market entirely. Instead, market swings can create an opportunity to evaluate whether a portfolio is more concentrated than it may initially appear.

For investors looking to create greater portfolio balance during market volatility, this often means exploring assets with different income sources, holding periods, and performance drivers, including private commercial real estate.

Understanding what volatility reveals can help investors evaluate whether their current allocation still supports their long-term goals.

How Market Volatility Exposes Hidden Portfolio Concentration

Having a large number of investments does not always mean a portfolio is fully diversified. While an investor may own multiple accounts, funds, or individual assets, those investments may still rely on many of the same market conditions.

For example, a professional may have a retirement account, brokerage account, index fund investments, and company stock. While each account serves a different purpose, they may all create significant exposure to public equities. In some cases, a person’s income and investments may also be closely connected to the same company or industry, creating additional portfolio concentration risk.

Portfolio concentration occurs when a large portion of an investor’s wealth is tied to similar assets, industries, or economic factors. During periods of public market volatility, different stocks and funds can respond similarly, revealing that a portfolio may have less diversification than expected.

Recognizing concentration does not mean investors need to change their strategy immediately. Instead, volatility can serve as a reminder to review factors like current asset allocation, liquidity needs, investment time horizon, income sources, and overall risk tolerance.

Read more: Multi-Tenant Commercial Real Estate vs Public Market Volatility

Why Investors Consider Assets Outside the Public Markets

When reevaluating portfolio balance, some investors explore assets outside public markets to achieve a different performance profile, not because traditional investments no longer have value.

Alternative investments may introduce different income sources, valuation methods, holding periods, market sensitivities, and performance drivers. These differences can help investors build a portfolio that is not entirely dependent on the same market factors.

However, adding an alternative investment does not eliminate risk. It changes the types of risk an investor accepts. Depending on the investment, these trade-offs may include reduced liquidity, longer capital commitments, greater reliance on sponsor or manager performance, more complex due diligence, and less frequent valuation or reporting.

Creating a balanced portfolio is not simply about owning more investments. It is about understanding how different investments work together, the purpose each asset serves, and whether those assets align with the investor’s long-term goals.

Download Kenwood’s Portfolio Stability and Volatility Comparison Guide to compare how public equities and private commercial real estate differ across income, liquidity, valuation, and long-term portfolio roles.

How Private Commercial Real Estate Can Serve a Different Portfolio Role

Investing in private commercial real estate is one option investors may consider when looking to create a broader investment strategy. Unlike publicly traded investments, private real estate has different performance drivers, timelines, and operational factors that influence results. Understanding these differences can help investors determine the role private commercial real estate may serve within their overall portfolio.

Market Pricing Versus Property-Level Performance

Public securities are continuously priced by the market, meaning values can fluctuate throughout the day based on investor activity, economic news, and market sentiment. Private commercial properties are valued differently, with valuations typically occurring periodically rather than through daily trading. This means changes in value are not reflected through continuous daily pricing, but it does not mean private real estate avoids volatility or investment risk.

Corporate Earnings Versus Lease-Based Income

Public stock performance is influenced by factors like corporate earnings, investor expectations, and broader market conditions. Commercial real estate performance is influenced by property-level factors, including rent collection, occupancy, lease terms, tenant retention, and operating expenses. Because these factors are tied to the property's operations, commercial real estate may offer exposure to a different source of potential income. Investors may also evaluate whether a multi-tenant structure reduces dependence on a single tenant or lease.

Daily Liquidity Versus Long-Term Capital

Public investments can generally be bought and sold quickly, giving investors greater access to their capital when needed. Private real estate typically requires a longer holding period, with investors committing capital for multiple years. Because of this structure, investors should consider their liquidity needs and maintain appropriate access to funds outside of a private real estate investment.

These differences allow private commercial real estate to serve a distinct portfolio function for some investors, particularly those seeking long-term income potential and exposure to tangible assets supported by active management.

What a Stability-Oriented Commercial Real Estate Strategy Looks Like

A stability-oriented commercial real estate strategy requires more than owning property. Long-term performance depends on the property, financing, tenant structure, sponsor alignment, and operating approach behind the investment.

At Kenwood, we focus on a long-term, income-oriented strategy by acquiring multi-tenant office, medical, flex, and warehouse properties throughout the Washington, D.C., and Baltimore markets. This structure creates multiple tenant-based income sources within a property, while staggered lease expirations can reduce dependence on a single tenant or renewal. Kenwood’s principals typically invest 10% to 20% of the equity in each acquisition alongside outside investors. We also directly manage the properties we own and make decisions based on long-term property performance rather than a short-term exit timeline.

Learn more about why investors and tenants choose Kenwood.

What Investors Should Consider Before Rebalancing

Rebalancing a portfolio is not about replacing one concentration with another. It is about understanding the role each investment plays and whether your overall strategy aligns with your financial goals.

Before making changes, investors should consider:

• Is more of my wealth tied to public equities than I realized?
• Are my income and investments dependent on the same company or industry?
• How much liquidity do I need to maintain?
• Can I commit a portion of my capital for several years?
• What role would private commercial real estate serve within my existing portfolio?
• Do I understand the sponsor’s experience, incentives, strategy, and responsibilities?
• Am I making a long-term allocation decision or reacting to short-term volatility?

Before reallocating investments during market swings, investors should review potential changes with their financial, tax, and legal advisors to ensure their strategy aligns with their individual needs and objectives.

Explore Building a More Balanced Investment Strategy

Public market volatility can serve as a valuable portfolio stress test by revealing how investments, income sources, or financial goals may be more closely linked than expected. For some investors, creating greater balance means exploring assets with different structures, timelines, and performance drivers. Understanding these differences can help investors make more informed decisions about how each investment fits into their long-term strategy.

If you're considering how alternative investments could complement your portfolio, our team is here to help. Contact us to explore strategies designed to help you build a more balanced, resilient portfolio for the long term.