Research Shows REITs Outperformed Private Equity Real Estate Funds
Based on IRR, listed REITs outperformed seasoned PERE funds by an average of 165 basis points per year and outperformed economic life funds by 186 basis points per year.
September 13, 2021 | Beth Mattson-Teig | WealthManagement.com
Which performs better, public REITs or private equity real estate (PERE) funds? That debate has been ongoing in the real estate investment industry for years, and a new comprehensive research analysis points to listed REITs as the clear winner.
According to findings in the research report, Private Equity Real Estate Fund Performance: A comparison to REITs and Open-End Core Funds, listed REITs outperformed closed-end PERE funds both on average and by the percentage of individual funds that outperformed. The analysis looked at performance data over a 20-year period (Q1-2000 thru Q4-2019) for both “seasoned” PERE funds, those funds at least four years and older, and also “economic” funds, or those with a vintage year of 2014 or earlier. Based on IRR, listed REITs outperformed seasoned PERE funds by an average of 165 basis points per year and outperformed economic life funds by 186 basis points per year.
The research is generating a lot of discussion in both PERE and public REIT circles. “I think it provides evidence that suggests that you should have at least some allocation of your portfolio to public REITs, and perhaps a larger allocation than you had before,” says David Ling, the Ken and Linda McGurn Chair, Professor of Real Estate and Director of the Nathan S. Collier Master in Science of Real Estate program at the University of Florida. Ling authored the report along with Thomas R. Arnold and Andy Naranjo.
