The Rotation Ahead: Why Real Estate Is Reclaiming a Seat at the Alternatives Table

The Rotation Ahead: Why Real Estate Is Reclaiming a Seat at the Alternatives Table

• September 1, 2026
• Education

For the better part of three years, real estate has sat in the proverbial penalty box, as private credit has been the darling of the wealth-management alternatives shelf. That order is starting to shift, and we believe disciplined, income-oriented real estate is where thoughtful RIAs should look next.

Real Estate's Time in the Penalty Box

The Federal Reserve's tightening cycle hit real estate hard, and few episodes crystallized investor anxiety more than the wildly reported gating events across the industry, where many firms saw redemption requests outpaced their liquidity. This left retail investors in limbo for months waiting for their own capital. Many advisors learned the hard way that open-ended, daily-priced-feeling real estate vehicles carry liquidity mismatches that can strand clients precisely when they most want out.

Layered on top of a genuinely difficult rate environment for cap rates and refinancing, this experience muted real estate allocations across much of the RIA channel, while redirecting new alternatives dollars elsewhere.

Private Credit Filled the Vacuum - For Good Reason

Private credit, delivered through business development companies (BDCs), stepped in and dominated the conversation. RIAs had a legitimate, ongoing need: clients wanted yield and diversifying income after a decade of near-zero rates, and direct-lending funds offered high coupons, quarterly distributions, and a story of downside protection through senior secured structures. Private credit checked most boxes on the alternative-income wish list.

Chinks in the Armor

Recent reporting highlights real cracks beneath private credits' positive public messaging. Loan defaults have climbed to their highest levels since at least 2021 across the industry's largest funds and nonaccrual rates at three of the largest funds now exceed the peaks reached during the 2023 rate-hike selloff.

Returns have compressed in lockstep. Funds that once routinely delivered 10%-plus annual returns are now straining to clear 7%, and at least one high-profile fund posted a trailing-twelve-month loss. "Liquidity" is also getting harder to pin down. Some managers inflate their liquidity numbers to look bigger than they really are by counting a credit line as available cash even when it can't be drawn down, or by including assets that seem liquid but would take real time to sell. The results are reported liquidity figures that often overstate what shareholders could actually get their hands on. Several of the largest nontraded BDCs have already seen redemption requests blow past their stated quarterly repurchase caps, the same structural symptom that afflicted some of the largest commercial real estate firms in the prior cycle.

None of this means private credit is broken. Senior-secured, lower-leverage direct lending to established sponsors still does what it was designed to do. Default rates remain below recent extremes, and stronger managers will separate themselves as the credit cycle plays out. But the gap between the industry's messaging and its underlying numbers is exactly the kind of dissonance that makes advisors start asking questions and start looking for alternatives to their alternatives.

The Rotation Back - Selective, Not Wholesale

Royal Oak is hearing directly from RIAs that a tactical rotation back toward select real estate strategies is underway. It is not a wholesale return to the asset class, as advisors remain wary of certain segments and large non-traded REITs with gating history and any perceived liquidity mismatch. The capital is instead moving into real estate strategies that focus on durable, mission-critical income streams with modest leverage, and structures that don't promise liquidity they can't deliver.

Where Royal Oak Fits

Royal Oak is purposely built for exactly this moment. The portfolio is concentrated on small and medium-sized industrial real estate. These properties are single-tenant, mission-critical buildings that tenants cannot easily relocate away from. That combination produces the kind of durable, contractual income RIAs are seeking as a complement to (or replacement for) compressing private credit and publicly available yields. What else makes Royal Oak stand out in the crowded room of alternatives?

• Tax efficiency: Royal Oak's distributions are reported on Form 1099-DIV, targeting only 20-30% ordinary income year in, year out, with the balance sheltered by depreciation, translating to a tax-equivalent yield north of 10% for a taxable investor.
• Modest fees: Royal Oak charges materially less than the layered fee stacks common among larger nontraded platforms, preserving more of the underlying yield for the end investor.
• Strong track record: The platform has built its years-long track record around underwriting discipline and conservative growth rather than chasing yield through leverage or speculative development.
• Minimal redemption history: Royal Oak has never gated or capped redemptions and has built real relationships with investors and partners. These "sticky" investors bought in to an offering structured from the start around the actual liquidity profile of the underlying real estate.

Royal Oak and single-tenant industrial real estate are not without risk, but rather than pretending that risk away we manage it by underwriting tenants for staying power, keeping leverage modest, and knowing the replacement economics of every building before we buy it. Royal Oak will never be a multibillion-dollar global asset manager, and that is on purpose. RIAs are not focused on scale, but on managers whose structure, outcomes, fee load, and redemption record match the promises being made. Where many private credit funds are missing these marks, Royal Oak's niche, disciplined, tax-aware, $1 billion industrial platform becomes a natural place for investor capital to land.

The Takeaway

Private credit earned its dominance by meeting a real income need, and it will remain a core piece of most alternatives' allocations. But the gap between its marketing and its metrics is widening, and RIAs are responding the way disciplined fiduciaries do. They are not abandoning the category but are instead diversifying away from its weaker corners and back toward real assets with cleaner structures. Royal Oak is built for this rotation and intends to earn its way out of the penalty box, one advisor conversation at a time.