Including asset classes in a portfolio that have low correlations to stocks is a great way to reduce portfolio volatility. Unfortunately, most traditional assets such as various equity segments, lower quality bonds, and even public real estate are more closely correlated with stocks than most people think.
Private nontraded real estate funds have historically low correlations to both stocks and fixed income while providing exposure to the third-largest asset class after stocks and bonds, commercial real estate. Historically, commercial real estate has been one of the primary ways large institutional investors have diversified their portfolios. Now these alternative investments are becoming more widely available to retail investors.