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Direct real estate’s potential to improve returns and reduce risk for target-date funds

As target-date funds have become more popular, portfolio managers have tried to improve diversification and risk management by adding asset classes. Many now hold high-yield bonds, emerging markets equity and real estate investment trusts (REITs). Until recently, however, no target-date mutual fund offered exposure to direct real estate—a separate asset class with investment characteristics distinct from equity and fixed income.

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