Fidelity, Brookfield Partner to Offer Private Canadian Real Estate Exposure

Fidelity Investments Canada has signed an agreement with Brookfield Asset Management, which will invest in and manage a newly created portfolio of Canadian real estate assets on behalf of Fidelity.

The new portfolio will allow individuals to invest in private real estate investments usually available only to institutional investors. According to the announcement, Fidelity plans to allocate the portfolio to some of its Fidelity Private Investment Pools and is also looking into other ways to use it.

“The portfolio will further scale our real estate asset management franchise and will aim to provide strong returns for investors by leveraging our best-in-class real estate operating platforms,” Brian Kingston, CEO of Brookfield’s real estate business, said in a release.

According to investment manager Invesco, private real estate has had the highest rolling 10-year average annual returns in 11 out of 20 time periods, compared with equities, bonds and Treasury bills. According to Invesco, real estate income, represented by net operating income growth, has outpaced inflation over the past 29 years.

The firm noted that institutional investors such as pension funds, foundations and insurance companies historically have invested about 6% to 12% of their portfolios in real estate.

Invesco also cited three additional benefits of investing in private real estate:

Diversification: U.S. private real estate has a historically low correlation to stocks and bonds;
Income potential: The 20-year average income return for U.S. private real estate is 5.45%, compared with 6.68% for U.S. fixed income and 1.76% for U.S. equities; and
Tax advantages: Private real estate can pay three types of distributions: ordinary income, capital gains or return of capital, which are each taxed at different rates.