Key Takeaways
- • Pagaya's SmartResi fund has declined 54.5% cumulatively since its second-quarter 2021 inception, erasing approximately $300 million in investor capital through Q3 2025.
- • The fund fell an additional 10% during Q3 2025 alone and has lost roughly 24% year-to-date in 2025, with cumulative losses reaching nearly 40% since launch.
- • SmartResi manages $432 million in assets across approximately 1,400 U.S. residential properties selected via Pagaya's proprietary AI models designed to identify undervalued assets and optimize risk management.
- • The fund's performance substantially underperforms broader real estate benchmarks: the MSCI US Investable Market Real Estate 25/50 Index gained 17% over the same period, highlighting significant relative underperformance despite AI-driven portfolio construction.
- • Investor capital remains locked until end of 2027 (extendable to 2029), with Pagaya collecting a 1.5% annual management fee; broader market headwinds from rising interest rates and declining property valuations have compounded the fund's challenges.
Summary
Pagaya's AI-powered real estate investment vehicle, the SmartResi fund, has delivered substantial losses to institutional and qualified investors since its launch in Q2 2021, according to third-quarter 2025 results obtained by Calcalist. The fund has declined 54.5% cumulatively, erasing approximately $300 million in investor value. During Q3 2025 alone, the fund fell an additional 10%, extending a deteriorating performance trajectory that saw the fund decline roughly 24% through the first nine months of 2025.
SmartResi is one of Pagaya's largest funds, managing $432 million in assets as of Q3 2025. The fund's portfolio comprises approximately 1,400 residential properties across the United States, with asset selection driven by Pagaya's proprietary AI algorithms designed to identify undervalued properties relative to market pricing. The stated investment thesis centers on using machine learning to improve asset selection, enhance risk management efficiency, and generate excess returns. However, the fund's realized performance has substantially disappointed.
The timing of SmartResi's launch coincided with deteriorating conditions for U.S. real estate investors broadly. Rising interest rates and declining property valuations have pressured the sector since 2021. Nevertheless, SmartResi has significantly underperformed relevant benchmarks: the MSCI US Investable Market Real Estate 25/50 Index rose approximately 17% between Q2 2021 and Q3 2025, creating a 71.5 percentage-point performance gap between the fund and the broader market index over the same period.
Investor capital in SmartResi remains locked until December 2027, with fund managers retaining the option to extend the lock-up through 2029. Pagaya charges a 1.5% annual management fee on assets under management. The fund was marketed to both Israeli and U.S. qualified and institutional investors. The substantial losses and capital lock-in have generated investor concerns regarding liquidity and returns, positioning SmartResi as a cautionary case study regarding AI-driven asset selection in cyclically challenged real estate markets.
SmartResi is one of Pagaya's largest funds, managing $432 million in assets as of Q3 2025. The fund's portfolio comprises approximately 1,400 residential properties across the United States, with asset selection driven by Pagaya's proprietary AI algorithms designed to identify undervalued properties relative to market pricing. The stated investment thesis centers on using machine learning to improve asset selection, enhance risk management efficiency, and generate excess returns. However, the fund's realized performance has substantially disappointed.
The timing of SmartResi's launch coincided with deteriorating conditions for U.S. real estate investors broadly. Rising interest rates and declining property valuations have pressured the sector since 2021. Nevertheless, SmartResi has significantly underperformed relevant benchmarks: the MSCI US Investable Market Real Estate 25/50 Index rose approximately 17% between Q2 2021 and Q3 2025, creating a 71.5 percentage-point performance gap between the fund and the broader market index over the same period.
Investor capital in SmartResi remains locked until December 2027, with fund managers retaining the option to extend the lock-up through 2029. Pagaya charges a 1.5% annual management fee on assets under management. The fund was marketed to both Israeli and U.S. qualified and institutional investors. The substantial losses and capital lock-in have generated investor concerns regarding liquidity and returns, positioning SmartResi as a cautionary case study regarding AI-driven asset selection in cyclically challenged real estate markets.
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