(Bloomberg) -- Rush Island Management, a real estate-focused hedge fund that was part of Northwood Investors LLC, gained 31% last year, beating the S&P 500. 

The firm has bought shares of landlords that own properties with shorter leases, such as apartments, single-family rental homes or hotels, betting they’ll benefit as inflation rises. The pandemic has created more opportunities, according to Steve Millham, who co-founded New York-based Rush Island with Raleigh Nuckols.

“There are companies scarred from Covid that’ll be recovering over the next couple years,” Millham said in an interview. “And issuing as much debt as the U.S. did over the past two years has created inflationary pressures that’ll manifest itself positively for a bunch of real estate companies.”

The strategy helped Rush Island outperform the S&P 500, which had a total return of 29% last year, including dividends. 

The firm is also shorting stocks of companies that face pressures from e-commerce and technology, such as regional- mall owners, and others expected to be hit by rising interest rates, including homebuilders.

“Our short book has generated profits since inception” in 2018, Millham said.

Rush Island, which recently completed a management-led buyout from Northwood, has doubled its assets under management in the past year. The bulk of its investors are college endowments and charitable foundations. 

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