Prudently Imprudent

The defined-benefit pension community has long been a tough sell when it comes to the merits of using listed REITs as a major component of their real estate allocations. The obvious common sense arguments favoring REITs have generally not been sufficient to offset concerns that REITs don’t really behave like real estate. Daily trading volatility and high correlations with equities over short time spans serve as fuel to those concerns, and evidence to support the REIT case was scant when REITs became a credible alternative twenty years ago. As a result, inertia has prevailed and private vehicles continue to dominate.