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. Listed REITs and real estate securities provide:
- An effective and low-cost investment in the real estate asset class;
- An efficient way to gain global real estate exposure; and
- A complement to private investment in the real estate portfolio.
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. In addition to strong performance, stock exchange listed REITs possess other compelling investment attributes, including:
- Market liquidity;
- Operating transparency;
- Investor-aligned corporate governance; and
- A simple business model focused on the intelligent use of scarce capital and devoid of complex financial engineering.
Pension plan fiduciaries, endowment and foundation fund investors are, in increasing numbers, realizing the benefits of including a REIT allocation in their investment portfolio.
- More than one half of institutional investors in the real estate asset class on an asset weighted basis report gaining some or all of their exposure to real estate through investments in listed REITs.
- These organizations represent all segments of the institutional investment market, including public and corporate plan sponsors, government agencies, and multi-employer plans.
- Research paper: CEM Benchmarking: Disconnect Between Capital Allocations and Asset Level Returns
- NEPC’s Sean Ruhmann explains why REITs should have a place in institutional investors’ portfolios.
- Ralph Block explains why only stock exchange-listed REITs provide the diversification the majority of investors want and need.
- Research paper: A Primer on US Equity REITs and Their Role in an Institutional Investment Portfolio.
Investor Education & Outreach
NAREIT serves the institutional investor community as a resource with respect to the role REITs and listed real estate can play in investment portfolios. Through its investor education and outreach initiatives, NAREIT provides industry information and research analysis to help support and inform institutional investors’ understanding of how REITs and listed real estate can help build value, deliver income, and manage risk within investment portfolios. Many plan sponsors, investment consultants and investment managers rely on data from NAREIT’s internal research team and independent research partners for information to assist them in their own analysis of listed real estate.
Should you be interested in learning more about NAREIT’s Research & Investor Outreach program and the resources available to assist you in considering REITs and listed real estate for your investment program, please contact a member of NAREIT’s Investment Affairs & Investor Education team.