Individual investors represent a core component of the REIT investment universe. Whether investing in individual companies, through a REIT mutual fund or exchange-traded fund or through a retirement plan, an increasing number of individuals have recognized the benefits of including a REIT allocation in their investment portfolios.
If you're among the majority of financial advisors who recommend REITs for portfolio diversification, you already understand how marketplace factors are converging to create needs that real estate investment trusts are well positioned to address. These factors include and ongoing need for the regular investment income stream that REITs have historically provided and Investor interest in benefiting from an improving economy and the ongoing recovery of commercial real estate.
Pension and Endowment Funds
As pension, endowment and foundation fund investors evaluate the benefits that exposure to commercial real estate bring to investment portfolios, they should know that stock exchange-listed REITs and real estate securities offer meaningful advantages as a way of obtaining that exposure. Stock exchange-listed REITs have delivered consistently higher long-term investment returns when compared with other public market equity and fixed income investments, as well as with private equity real estate investment benchmarks.
Defined Contribution Plans
Defined benefit pension plans have invested in real estate, including stock exchange-listed REITs, for decades. While defined contribution programs such as 401(k), 403(b) and 457 plans, have been slower to include real estate, their adoption of the real estate asset class in recent years has been rapid. A significant portion of plans have added real estate investment options on a stand-alone basis. However, many more have incorporated the asset class within their asset allocation offerings, such as target-date funds.