Debt Funds Are Outperforming Equity
In a market where interest rates remain elevated and property values are still finding their footing, private real estate credit funds have quietly become one of the best risk-adjusted returns available to investors.
The numbers tell the story. Across the industry, private real estate debt funds have annualized approximately 9.0% returns with just 2.9% volatility, according to industry benchmarks. Compare that to open-end equity real estate funds, which returned around 4% over the same period with significantly more downside risk.
For investors in the Requity Income Fund, understanding how these returns are generated helps explain why the strategy works, especially in today's rate environment.
The Mechanics: Where the Yield Comes From
A real estate credit fund lends money to commercial property owners, typically in the form of bridge loans, construction loans, or mezzanine debt. The fund earns interest income on these loans, and that income flows through to investors after fund expenses and management fees.
The yield stack
Consider a typical bridge loan in the fund's portfolio. The loan carries a 10.5% interest rate on a 12-month term, secured by a first lien on a multifamily property at 70% loan-to-value. The fund also collects 1 to 2 points in origination fees at closing.
On a $1 million loan, that is $105,000 in annual interest income plus $10,000 to $20,000 in origination fees. Across a diversified portfolio of 30 to 50 loans, these cash flows create a predictable, recurring income stream.
After fund-level expenses (management fees, administration, legal, accounting), the net yield to investors lands in the 8% to 10% range, depending on fund structure and leverage.
Why Higher Rates Help Debt Funds
This is the counterintuitive part. While higher interest rates hurt equity real estate investors (by compressing property values and increasing borrowing costs), they directly benefit debt fund investors.
When the Fed holds rates at 3.50% to 3.75% and 10-year Treasuries yield 4.60%, bridge loan rates naturally sit higher, in the 8.5% to 13% range. That elevated base rate flows directly into fund income. A debt fund that generated 7% yields in a low-rate environment can generate 9% or more today with the same risk profile.
This is why investor capital is rotating into private credit. As one industry report noted, non-traded REIT investments declined from $33.2 billion in 2022 to $5.7 billion in 2025, while private credit fundraising surged to $51 billion in 2025, the highest since 2021.
Risk Protections Built Into the Structure
Real estate credit funds sit in a fundamentally different risk position than equity funds. As a lender, the fund has a senior secured claim on the property. If the borrower defaults, the fund can foreclose and recover its capital from the property value.
The loan-to-value ratio is the primary protection. A fund that lends at 70% LTV has a 30% equity cushion before it takes a loss. Property values would need to decline 30% or more for the fund to lose principal on any individual loan.
Additional protections include personal guarantees from borrowers on most loans, interest reserves held in escrow (typically 6 to 12 months), insurance requirements, and diversification across dozens of loans in different markets and property types.
What to Evaluate Before Investing
Not all real estate credit funds are created equal. Here are the key factors to assess.
First, look at the fund's average loan-to-value ratio. Funds lending at 60% to 70% LTV have stronger downside protection than those pushing to 80% or higher.
Second, examine the portfolio composition. A fund concentrated in one property type or geography carries more risk than a diversified portfolio. Look for exposure across multifamily, manufactured housing, mixed-use, and other commercial property types.
Third, check the track record. How many loans has the manager originated? What is their default rate? How have they handled problem loans? A manager with 5 or more years of lending history through different market cycles provides more confidence than a new entrant.
Fourth, understand the fee structure. Management fees typically run 1% to 2% annually. Performance fees (carried interest) vary. Lower fees mean more return flows to investors.
How the Requity Income Fund Fits
The Requity Income Fund invests in first-lien bridge loans originated by Requity Lending. This vertically integrated model means the same team that originates and underwrites the loans also manages the fund, creating alignment between lending decisions and investor outcomes.
The fund targets a 10% annual return to investors and focuses on loans secured by multifamily properties and manufactured housing communities, two sectors with strong demand fundamentals and limited new supply. Target returns are an objective, not a guarantee. Past performance does not guarantee future results, and all private investments carry risk, including the possible loss of principal. If you are an accredited investor looking for consistent income with built-in downside protection, learn more about the fund here.