This startup just unlocked a $8.5 trillion new investment opportunity

Fundrise

What if everything you’d been told about how to invest your money was wrong?

What if you found out that almost every major institutional investor earned higher returns than you by following a totally different investment strategy?

And, what if for the first time ever that strategy was available to you?

Fundrise, a Washington, DC-based financial technology startup is asking investors that very question by launching the first ever low-cost private market real estate investment platform, giving anyone in the US access to the same sophisticated investment strategy employed by institutions like the Yale University Endowment and the $300 billion California State Public Employees Pension Fund (CalPERS).

Introducing modern portfolio theory 2.0

In the 1950s, an economist named Harry Markowitz introduced the Nobel Prize winning idea of modern portfolio theory, which over time has turned into what most people today think of as traditional portfolio allocation.

This widely used allocation model is based on the idea of balancing your portfolio between publicly traded stocks and bonds depending on your age, with most investors starting off with a standard allocation of 70% stocks and 30% bonds.

The problem with this traditional allocation model is that it assumes the only investment opportunities available are publicly traded stocks and bonds.

Meanwhile, many of the most successful large institutions have consistently earned higher returns by following their own portfolio allocation model that has one large distinct difference, the inclusion of private market alternative assets like real estate. For example, the private investment holdings of the California Public Employees’ Retirement System generated 20-year annual net class returns of 12.3%, compared with 8.2% for its public equity holdings — a 400 basis point differential.

Fundrise

Why haven’t millions of investors switched to this higher performance model? The simple answer is they couldn’t.

Now that’s all changing thanks to Fundrise and a new idea they’ve created called modern portfolio theory 2.0 — a technology-enabled approach for individual investors to invest in a low-cost portfolio of private market real estate assets through a simple online platform.

Fundrise’s track record shows that this new portfolio approach can help average investors earn the same types of higher returns that have been previously only enjoyed by the ultra-wealthy. Based on research they’ve compiled, they estimate that today individual investors pay a premium by only investing in the public market. This premium can be as high as 33%, meaning that as an investor who is looking for a long-term passive investment approach, you could be losing as much as 33% of your potential returns.

Fundrise

“We think this is the biggest change in the investment industry since the invention of the mutual fund,” says Fundrise CEO Ben Miller. “For too long this type of investment strategy has been exclusively available to only the wealthiest individuals, but we’re changing all that. Technology allows us to operate more efficiently and at a lower cost, making it feasible for someone with $1,000 or $10,000 to get the same type of sophisticated portfolio as a billion dollar endowment.”

While their modern portfolio theory 2.0 may be just starting to pick up large scale adoption, Fundrise isn’t exactly your stereotypical garage-based startup. The company has been around since 2010 and has invested nearly $250 million in more than $1.2 billion of real estate. Their historical performance from 2014 to 2017 includes average annual returns ranging from 8.76% to 12.42%. The company itself consists of nearly 50 employees, including a seasoned real estate team who have come from some of the industry’s largest private equity funds and commercial lenders — all with the goal of turning an old fashioned industry on its head.

“We’re at the forefront of a long-term generational shift,” says Miller. “Like e-commerce in the 1990s, the internet is going to completely change the way people think about investing and saving for their future.”

The company likens its approach to a combination of Amazon and Vanguard, with the goal to completely revolutionize the investment industry.

With nearly 200,000 members and growing, Fundrise seems well on its way.

This post is sponsored by Fundrise. | Content written and provided by Fundrise.

^{Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in partial or total loss. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Neither Fundrise nor any of its affiliates provide tax advice and do not represent in any manner that the outcomes described herein will result in any particular tax consequence. Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances. Neither Fundrise nor any of its affiliates assume responsibility for the tax consequences for any investor of any investment. The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at fundrise.com/oc.}

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