In the latest episode of The REIT Report: NAREIT's Weekly Podcast, portfolio manager Gillian Tiltman of Neuberger Berman discussed the importance of global REIT allocations.
Tiltman co-authored a paper on the characteristics of REIT investment that Neuberger Berman released earlier this month. The paper advocated that listed real estate securities provide the best way for real estate investors to design global portfolios. Tiltman discussed why some investors remain skeptical about the divergence of REIT returns and the performance of the broader equities markets.
Tiltman noted that some investors, especially in Europe, still show a preference for direct real estate investment and open-ended property funds over investing in REITs and publicly traded real estate companies. She said that while REIT stocks can behave like the equity market in the short term, “over the long term, you’re fundamentally buying that real estate.” With the growth of REITs around the world, they now provide “the best and in a lot of ways the only way to build a global real estate portfolio, and you do that in an incredibly liquid way.”
Tiltman also emphasized the diversification benefits of global REITs for investment portfolios.
“It has been proven that the interregional correlation of REITs is much lower than that of bonds and equities,” she said. “Real estate in one part of the world trades very differently than real estate in another.”
Tiltman pointed out that the liquidity of REITs offers another advantage.
“It’s very difficult to buy and sell assets quickly, whereas if you’re buying and selling a stock, you have the advantage of being able to get that real estate exposure, but with the liquidity of the stock market. We like to say that buying REITs is buying bricks and mortar with liquidity.”