New York-based Blackstone Group announced yesterday that it is limiting withdrawals of its popular private real estate fund, the Blackstone Real Estate Income Trust (BREIT), for the fourth month in a row.

As when this first happened late last year, the reason is excessive withdrawal requests—primarily from Asian investors, according to statements from Blackstone CEO Stephen Schwarzman.

In February, investors sought some $3.9 billion in redemptions, but Blackstone was only able to redeem $1.4 billion, or 35% of those requests.

As a rule, nontraded funds like BREIT “gate” withdrawals when requests exceed 2% of the fund’s net asset value per month, or 5% per quarter. This is considered a necessary safety mechanism, not a sign of trouble, as it protects investors against forced asset sales to meet liquidity obligations. It’s designed to protect shareholders.

But does this fourth straight month of outsize redemptions signal a run on shares? Not exactly, said Michelle Connell, president of Dallas-based Portia Capital Management. “The cap is there for a reason,” she explained. “This is not a panic.”

She conceded, however, that this ongoing spate of illiquidity has given her pause.

“When this first occurred to Blackstone, I rethought my exposure to interval products that contain private assets—not just real estate but private debt as well,” said Connell. “I actually switched out of an all-private-debt fund and substituted an interval fund that was half public and half private debt. I did not want to have to be caught in a market liquidity crunch that requires the sale of private assets. Fire sales don't end well for the seller.”

Established in 2017, BREIT is a nonlisted real estate investment trust (REIT) that focuses on generating income primarily through investments in residential and commercial real estate and, to a lesser extent, real estate debt instruments. Since inception, it has realized 12.3%, with three-year annualized returns of 14.4%. Its current net asset value is $71 billion and total asset value is $125 billion, according to its website.

Some might wonder whether BREIT’s redemption squeeze is a signal that it’s time to re-evaluate private REITs versus more liquid public REITs. But Connell doesn't share that view.

“Public REITs trade like stocks. They don’t trade like real estate,” she said. If investors want an asset class that's not correlated to stocks and behaves like real estate, they have to choose properties that are “held in some sort of private market wrapper,” she said.

To be sure, liquidity is always an issue with such nontraded assets. That’s partly why most buyers have to be accredited investors—meaning they fit the SEC definition of being sufficiently financially sophisticated and not needing the same degree of liquidity or regulatory protections as ordinary investors. Most are high net worth individuals or institutions.

“You don't buy private real estate if you need the funds in the short term,” said Connell. “Investors need to choose the right buckets or asset classes that will provide the liquidity that they need in the short and long term.”