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Survey Affirms Sweet REIT Net Return

Phil Hall
Oct 09, 2014

Real estate investment trusts (REITs) received a major vote of confidence in a soon-to-be-released survey that found these vehicles generated the highest net return of all asset classes among 900 corporate and public defined benefit plans.

According to an upcoming CEM Benchmarking Inc. study that was previewed in the trade journal Pensions & Investments, listed equity REITs offered an average annual net return of 11.31 percent, ahead of private equity at 11.1 percent and non-real estate real assets (including commodities, infrastructure and natural resources) at 9.85 percent.

In regard to a gross return basis, private equity was found to be the best performing asset class at 13.31 percent, followed by REITs at 11.82 percent and non-real estate real assets at 10.88 percent. Yet Alexander D. Beath, a CEM analyst and author of the study, noted that this should not be construed as a demerit for REITs.

“[Private equity] had the highest gross returns, and they got that by taking riskier positions,” Beath said. “If you subtract costs, REITs becomes the best-performing asset class.”

REITs were also judged to be among the most volatile of asset classes at 20.17 percent; non-U.S. stocks were viewed as having the highest volatility, at 24.02 percent, followed by U.S. small-cap stocks at 20.58 percent.

The CEM study covered the period between 1998 and 2011 and was commissioned by the National Association of Real Estate Investment Trusts.

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