In recent years, institutional investors have turned to a range of private investments – equity, debt and real estate - in search of higher returns. However, while private equities and debt have outperformed their listed counterparts for the past 20 years, the same cannot be said in real estate. REITs, as represented by the FTSE NAREIT All Equity Index (the NAREIT Index) have outpaced the CREIF ODCE (Open-End Diversified Core Equity) Index by 2.4% per year (on a gross basis) for the 20 years ended 31 December 2019. Our research indicates greater cash flow growth from specialty property sectors, which are, by definition, absent from private funds, primarily explains the historical outperformance of REITs.
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