Institutional investors have long debated the merits of investing in private real estate funds versus public REITs. But the key question should not be which performs better, but rather whether investing in private funds and REITs is complementary in a diversified real estate portfolio and whether private fund returns deliver sufficient alpha to justify higher risk and less liquidity. Our analysis suggests both to be the case — that a well-selected portfolio of private funds outperforms over the long term, and REITs also play an important role in a portfolio, providing solid returns over market cycles while offering liquidity and certain tactical benefits.
As reported in Hodes Weill & Associates’ Institutional Real Estate Allocations Monitor, published in partnership with Cornell University’s Baker Program, institutions are actively allocating capital to both private funds and REITs. More than 80 percent of institutions have plans to invest in private funds
