REITs play important roles in institutional portfolios

REITs merit a place in a multi-asset portfolio for institutional investors, according to “The Role of REITs in Real Estate Allocations,” a recent report co-published by DWS and GIC, Singapore’s sovereign wealth fund. Investors can use REITs to complement private real estate in building a diversified portfolio in a cost- and resource-efficient manner, given REITs differ from their private counterparts in terms of liquidity as well as geographic and sectoral breadth.

Key takeaways

REITs are fundamentally real estate, exhibiting high correlations and similar returns over long periods. REITs offer investors greater liquidity than direct real estate, although prices may diverge in the short term. REITs offer an expanded opportunity set, providing diversified sector exposure at small capital outlays. REITs allow for efficient and timely capital deployment, to both complement and temporarily substitute private wealth real estate.