The liquidity provided by listed REITs (the ability to freely buy and sell shares on the open market) makes them a valuable tool for investors engaged in tactical asset allocation. Listed REITs enable investors to capitalize on short-term market conditions to either raise or lower an allocation to the asset class, broadly or to execute a sector-specific strategy that may target a particular property type, for example. This strategy comes with its own share of risks, but the liquidity of listed REITs provides investors the flexibility to engage in this approach.
How defined benefit pension plans are using REITs:
- To further diversify their overall real estate allocation and as a complement to a direct investment (or to investment in real estate through private vehicles)
- To employ tactical asset allocation
- To efficiently gain international real estate exposure
- To access property types and/or markets that might be difficult to invest in directly
- To secure the most efficient, cost-effective and practical means by which investors can gain real estate exposure
Source: “Investment Insights: Real Estate Investing the REIT Way,” Barclays Global Investors