Pagaya Real Estate AI Fund Faces 54.5% Negative Yield Amid High Rates

Pagaya’s real estate fund, which utilizes artificial intelligence to invest in US residential property, has posted a negative yield of 54.5% since the beginning of 2022. The fund, Pagaya SmartResi Fund I, raised $250 million from investors and leveraged its assets to reach nearly $830 million. Since then, the value of its assets has shrunk by $480 million, with investor losses totaling $135 million.

Asset Reductions and Portfolio Performance

The fund employs the AI technology of the Israeli fintech company to identify and acquire single-family homes across the US. In the second quarter of 2026, it recorded an additional negative yield of 10.28%, deepening its year-to-date loss to 13.9%. The fund currently holds 888 single-family homes spread across 412 US zip codes, marking a sharp decline from 1,400 properties last year. The occupancy rate stands at 92.3%, and the rent collection rate is 96.2%. The average purchase price of a home in the fund is $317,000, with an average monthly rent of $2,016.

Macroeconomic Pressures and Financing Costs

The losses stem largely from the sharp macroeconomic shift since the fund's launch in 2021. Acquired during a period of low interest rates, aggressive rate hikes by the Federal Reserve spiked financing costs and mortgage rates, weakened housing demand, and pressured asset values. Simultaneously, rising US Treasury yields drove up capitalization rates and made safer investments more attractive. Launched for qualified and institutional investors in Israel and the US, SmartResi locked investor funds until at least the end of 2027, with management holding the option to extend until 2029 alongside an annual management fee of 1.5%. These weak results contrast with Pagaya’s core operations today, having pivoted away from fund management to become a primary technology platform for credit and securitization.