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REITs as a Proxy for Direct Real Estate Investing

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August 19, 2019
Timbercreek

An allocation to real estate offers a host of benefits for investors of all types: a stable income stream and strong returns, inflation protection, capital preservation and diversification through non-correlation to the broader markets. 

But retail clients may not have the financial capacity to invest in commercial real estate directly. For these investors, real estate investment trusts (REITs) are an effective alternative – with some added advantages. Unlike direct investing, which has high barriers to entry, REITs are easily accessible by investors of all types. REITs also have a highly liquid and transparent structure. Plus, they offer a diversification advantage by providing access to a wider range of real estate exposures than direct investing. 

Active management is the solution 

Through careful screening and selection, active management is able to create a portfolio of pure-play REITs that retain all the advantages of listed vehicles while at the same time capturing the benefits of direct real estate investments.

Returns for the actively managed, pure-play portfolio of publicly listed real estate is on par with direct real estate investment. Volatility for direct real estate will always be lower than publicly listed investments. 

A strong process is the key to achieving the advantages of active management described above. It should include two key phases, as outlined in our whitepaper.

For more information, click here to read our whitepaper REITs as a proxy for direct real estate investing.