REITs vs. Private Real Estate Funds: Partners, Not Rivals: Comparing Top Performing Funds

Nareit

Edward Pierzak

Research

7 Pages

Nareit compares REITs with private real estate funds and finds listed real estate held up better across the return distribution. Using CEM data from 1998 to 2022, it says fee drag is a big divider, with REITs still generating net alpha after costs while private real estate did not.

Key Takeaways

Net Alpha Diverged: Gross value added was 0.87% for REITs and 1.08% for private real estate, but net value added was 0.34% for REITs versus -0.62% for private real estate.
REITs Won Broadly: Across the 10th, 25th, 50th, 75th, and 90th percentiles, REITs outperformed private real estate, with the largest gap at 3.02% in the 10th percentile.
Dataset Was Deep: The analysis used 26 years of pension data from 1998 to 2023 covering nearly $4 trillion in combined assets under management.
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