Property REITs were better-performing than hedge funds, according to a study of 200 major pension funds.
Listed equity REITs outperformed 11 other asset classes with annual net returns of 12%, and average annual investment costs of 0.5%, according to research sponsored by the US-based National Association of Real Estate Investment Trusts.
The study, by pension research firm CEM Benchmarking, looked at the fund performance of more than $3tr in 200 public and private sector pension plans invested in 12 asset groups over a 17-year period.
Hedge funds produced less than half the net returns, at 5.5%, and were the second lowest of the assets, according to the study.
Alexander Beath, senior research analyst at CEM Benchmarking, said: “The fact that listed equity REITs were the top-performing asset class, but represented only 0.6% of total allocations, the lowest allocation in the study, and have only realised an increase in capital of 30 basis points since 1998, is a complete disconnect.
“The combination of limited portfolio allocations and outsized returns of REITs led to a significant missed opportunity for pension funds and may point to a strategy for improving future returns.”
• To send feedback, e-mail david.lindsell@estatesgazette.com or tweet @DavidLindsellEG or @estatesgazette
