How is the Global Listed Property Market Configured?
While the U.S. remains the largest listed real estate market, the listed real estate market is increasingly becoming global. The growth is being driven, importantly, by the appeal of REITs.
The most common index for the REIT and global listed property market is the FTSE EPRA/NAREIT Global Real Estate Index Series, which was created jointly by the index provider FTSE Group, NAREIT and EPRA, the European Public Real Estate Association. The index is used by a variety of institutional investors, money managers and funds to manage real estate investment on a global basis. It contains both REITs and non-REIT listed property companies. The Global Index Series contains the Developed Markets indices and the Emerging Markets indices.
As of September 30, 2015, the FTSE EPRA/NAREIT Global Real Estate Index included 487 stock exchange-listed real estate companies in 38 countries around the globe. Of the $1.2 trillion in equity market capitalization represented in the Developed Markets index, 79 percent came from REITs.
As of September 30, 2015, The FTSE EPRA/NAREIT Emerging Market index included 157 publicly traded Equity REITs and listed property companies from 16 emerging markets across the Americas, Europe, the Middle East, Africa and Asia.
What Benefit Does a Global Listed Real Estate Allocation Provide in a Diversified Investment Portfolio?
Research done by the investment consulting firm Wilshire Associates showed that an allocation to global listed real estate improved the returns of a diversified investment portfolio.
Analyzing the risks and returns for various asset classes (stocks, bonds, real estate and cash) for the period of 1976-2014, Wilshire constructed optimized portfolios of these assets – with and without an allocation to global listed REITs – for a variety of investment horizons. Over the period of the analysis, Wilshire found that a portfolio including global listed REITs would have produced a higher annualized portfolio return and lower annualized portfolio risk when compared with a portfolio not including global listed REITs, resulting in an ending portfolio value that was 6.5 percent higher when global listed REITs were included.
How Can I Add a Global Listed Real Estate Allocation to My Portfolio?
The easiest and most cost-efficient way to add a global listed real estate allocation to a portfolio is purchasing an investment in a mutual fund or exchange-traded fund of these securities. A list of such funds can be found in our Investing section.