Publicly traded REITs are companies that own or finance income-producing real estate across a range of property sectors, according to Nareit. These real estate companies have to meet a number of requirements to qualify as REITs, and most REITs trade on major stock exchanges. For institutional investors, this means REITs can be seen as either an equity investment or a real estate investment — or both.

“Over most intermediate- and longer-term time periods, publicly traded REITs have offered investors total returns that are modestly in excess of the returns earned by direct real estate investing,” says Tyler Grant, CFA, vice president, equity analyst at AEW Capital Management. “However, the big debate surrounds the risk side of the story, where, based on the indices, REITs have historically experienced total return volatility meaningfully in excess of that witnessed on the direct side. There are a number of reasons why this might be the case, but most notably, private ma