Direct Real Estate or a Fund: Who Chooses the Assets?

An investor in a property fund chooses the manager, and the manager chooses everything else: the cities, the buildings, the tenant profiles, the leverage and the exit. A divisible direct interest returns the allocation decision to the investor, but only within the set of assets a platform has sourced and underwritten. Discretion in that structure covers selection, weighting, timing and adjustment; it does not cover the quality of the set on offer, which makes underwriting discipline the variable an allocator should judge platforms on.

Capital goes into a fund and emerges some years later having experienced whatever the manager decided to do with it. That is a legitimate model. It works well where the investor lacks the time, knowledge or access to make individual asset decisions, and where the manager has a genuine edge in sourcing, underwriting or operating.

It is not the only model, and for an allocator who does hold views, who has opinions about which European markets are more interesting than others and wants a portfolio reflecting their own judgment, handing that judgment over entirely is a significant constraint rather than a convenience.

Why do most property portfolios reflect availability rather than design?

Most property investors, including sophisticated ones, hold portfolios they did not entirely design. They hold what was available when they had capital, what they could negotiate within budget, what an agent recommended in a market they happened to know. The portfolio looks as it does because of a sequence of individual transaction decisions made under individual constraints, not because an allocation framework was applied consistently.

That is not a criticism of those investors. It is a description of what the instrument permitted. The transactional infrastructure of direct property does not allow coherent portfolio construction the way equity or fixed income infrastructure does. You cannot set a target allocation and fill it systematically across several markets; you buy what is available, when capital is ready, where you have relationships.

Indirect structures solve the access problem and introduce a different constraint. The investor gains diversification and professional management at the cost of control. A family office with a firm view on one national residential market, or on logistics assets in a particular corridor, or on value-add opportunities in secondary cities, cannot express that view through a diversified fund without diluting it substantially with positions it did not choose.

That is the trade. It has been the only trade available, which is why it has rarely been examined as a trade at all.

The preference itself is documented rather than assumed. Knight Frank's Wealth Report 2026, drawing on a survey of more than forty family offices across the major global hubs, records that direct ownership "remains particularly attractive, allowing families to shape development strategies, manage risk and capture the full upside rather than sharing returns through fund structures" (Knight Frank, The Wealth Report 2026). The constraint on acting on that preference has been operational, not a lack of appetite for it.

What does discretion actually cover in a tokenized structure?

Precision here matters more than enthusiasm, because this is where the model is most often oversold.

Discretion covers which assets to hold from those available, at what weight, from what point in time, and for how long. That is genuine discretion and it is materially more than a fund investor has. An allocator can express a view that one market is more attractive than another by tilting toward it, take an initial position and add if the thesis holds, and reduce without exiting entirely.

Discretion does not cover which assets exist to choose from. In a direct model the investor makes the allocation choices, but those choices are constrained to what the platform has sourced, underwritten and structured. The set is curated, and the curator is not the investor.

That distinction is not a technicality. It determines what an allocator should actually be evaluating.

Why does the platform's curation become the dominant variable?

There is a structural consequence of the investor-as-allocator model that receives far less attention than the access story, and it inverts the usual analysis.

In a fund structure, the manager bears responsibility for asset selection. The record reflects the manager's choices. The investor evaluates the manager and delegates accordingly, and the evaluation framework for doing that is well developed.

In a direct model the responsibility splits. The investor makes the allocation decisions and the platform determines the option set. The platform's ability to identify well-located assets with realistic income, rigorous tenancy management and sound legal structuring becomes the foundation on which every individual portfolio is built, regardless of how skilfully any individual allocates across the options.

That makes the platform simultaneously more transparent and more concentrated as a risk. More transparent, because the investor can see exactly which assets they hold and why, without the opacity of a pooled vehicle. More concentrated, because every investor's portfolio quality ultimately reflects one organisation's sourcing and underwriting. The architect can only build with what the site provides.

This is not an argument against the model. It is an argument for being precise about what the model actually delegates. It delegates sourcing, underwriting and structuring, which are the decisions that most determine outcomes, while returning allocation, sizing, timing and adjustment to the investor. An allocator who understands that will evaluate platforms on underwriting discipline rather than on operational features, and that is the correct place to look.

The pattern is familiar from the wider market. The projects in this sector that have failed have generally failed on the asset side rather than the technology side, which is the same observation from the other direction.

What does a pan-European portfolio actually demand of the investor?

The framing has limits worth stating explicitly, and they are the limits an institutional reader will test first.

Asset selection across markets still requires judgment no platform substitutes for. Choosing between two assets in two countries depends on a view of both rental markets, confidence in the management structure in each jurisdiction, and an assessment of each asset's condition and tenancy quality. A divisible interest makes the position easier to take and adjust. It does not make the underlying judgment easier to form, and in unfamiliar markets it makes it harder, because ease of execution is not accompanied by ease of understanding.

Regulatory heterogeneity does not abstract away. Several European cities and regions have introduced rent regulation, caps on increases, constraints on re-letting prices, or requirements affecting how properties can be used and let. Those regimes differ substantially between jurisdictions and they change over the medium term. An interest in a German asset carries German tenancy law; an interest in a Spanish asset carries Spanish housing regulation. An investor building across several countries is accumulating exposure to several distinct regulatory trajectories, and the form in which the interest is recorded changes none of that.

Fiscal complexity is the dimension most consistently underestimated at the planning stage. An investor resident in one country holding interests in vehicles incorporated in several others faces a year-end position where income and gains may be reportable in several places at once, depending on applicable bilateral treaties, the characterisation of the interest under each jurisdiction's domestic law, and the structure of each vehicle. That does not prevent cross-border construction. It does mean the administrative overhead of holding across five jurisdictions is substantially higher than holding within one, and that entering without specific cross-border tax advice reliably produces surprises at declaration time.

It is also worth being concrete about what the European menu actually pays, because the answer constrains how much complexity is worth taking on.

An allocator should read that spread carefully. Roughly three points of gross yield separate the least and most productive major markets, and net of costs the gap narrows further. Adding a fourth or fifth jurisdiction to capture part of that spread means taking on a full additional regulatory and fiscal regime for a contribution that may be a fraction of a point at portfolio level. The arithmetic favours a small number of well-understood markets over a broad continental sweep, which is the opposite of the conclusion that easy access tends to invite.

There is also a subtler point about the analytical demand. European markets are not the same opportunity in different locations. One national residential market may be shaped by decades of housing policy, a renter-majority culture and strong tenant protection. Another may be shaped by international migration flows and a legacy of underinvestment in urban stock. A logistics market reflects distribution geography and port infrastructure rather than housing demand at all. These respond to different macro drivers, carry different sensitivity to financing cycles, and require different frameworks to analyse well. Building across them is a genuinely more sophisticated task than it appears from the outside.

How large is the opportunity actually expected to be?

An allocator assessing this space is entitled to ask what the forecasts say, and the honest answer is that they disagree substantially.

The spread is the useful information. A market whose credible forecasts differ by a factor of eight is a market in which the infrastructure question is not yet settled, and an allocator should treat any single projection cited without its counterparts as advocacy rather than analysis.

The present-day position is smaller than any of those numbers suggests. Tokenized real-world assets excluding stablecoins stood at roughly $31 to $34 billion in mid-2026 according to RWA.xyz, with around half of it in tokenized US Treasuries and real estate under 2 percent of the total. Whatever the destination, the current state is early.

The bottom line

Real estate has always been an asset class that serious long-term portfolios should contain. The evidence on income, capital preservation and inflation protection across European markets is strong. The evidence that most investors have been able to build and manage property portfolios with the discipline they apply elsewhere is considerably weaker.

The gap between what property offers as an asset and what it has offered as an instrument has been wide, and it has been an infrastructure gap rather than an asset gap. Those systems were designed market by market and jurisdiction by jurisdiction, which made cross-border European property investing prohibitively complex for anything below institutional scale.

A divisible, directly held interest narrows that gap without closing it. It returns allocation, sizing, timing and adjustment to the investor while leaving sourcing and underwriting with the platform. An allocator evaluating the model should therefore be asking a different question from the one the access narrative invites. Not whether they can build the portfolio they want, but whether the assets they would be building it from were selected by someone who applies the standard they would apply themselves.

This article is part of DeReal Perspectives on real-estate access, liquidity, and tokenization. It is analysis of the market, not investment advice or an offer of any kind.

Sources

• Knight Frank, The Wealth Report 2026, Family Office Survey (Apr 2026): knightfrank.com

• GlobalPropertyGuide, Gross residential rental yields, Q1-Q2 2026 surveys (2026): globalpropertyguide.com

• BCG and ADDX, Relevance of on-chain asset tokenization (2022): tokenized assets approximately $16.1T by 2030

• McKinsey, From ripples to waves (Jun 2024): mckinsey.com

• Deloitte Center for Financial Services, Tokenized real estate (Apr 2025): deloitte.com

• RWA.xyz, Analytics on Tokenized Real-World Assets (2026): app.rwa.xyz