The Lesson of Blackstone’s Retail Real Estate Fund: Liquidity Matters.

The recent move by


Blackstone


giant retail real estate fund to limit redemptions after outsize withdrawal requests is a wake-up call for investors in a once-hot sector that may now face more regulatory scrutiny.

Blackstone Real Estate Income Trust, known as BREIT, wasn’t supposed to offer surprises. The $69 billion BREIT, the leader among nontraded funds, was a way to get solid returns, a chunky 4% dividend, and the expertise of the world’s top commercial real estate investor. In return, investors sacrificed liquidity—they could only withdraw their investments from the fund, which doesn’t trade on an exchange, up to 2% of net-asset value a month and 5% a quarter. For quite a while, it worked; the fund returned 9% this year through October and 13% annually since its inception almost six years ago.