GLOBAL – Investor appetite for real estate securities funds has soared since the global financial crisis, with assets under management jumping 68% to $250bn (€191bn) between 2007 and 2012 and the number of funds rising 39% to 677, according to new research.
A study by Consilia Capital and Property Funds Research, commissioned by the European Public Real Estate Association (EPRA), estimates that the total assets for exchange traded funds pegged to FTSE EPRA/NAREIT real estate indices enjoyed a hefty 85% hike to $8.7bn in the 12 months up to February this year.
The report also showed that global real estate investment trust (REIT) funds, with $22.2bn in assets under management, now account for seven of the 10 largest global real estate funds.
Although listed real estate is subject to the vagaries of the stock market, the study highlighted several academic research papers that show that, over the long term, the sector not only delivers returns comparable to directly-owned properties but also enhances performance and diversifies risks.
However, both asset classes can fall victim to extreme stresses, as witnessed by the aftermath of the Lehman collapse when most investments dropped in tandem.
Alex Moss, managing director of Consilia and author of the report, said the main drivers behind the trend were a "low interest rate environment, the potential threat of inflation and the need for liquidity".
He added: "Real estate in general ticks all these boxes and the listed sector provides the liquidity. The other key message is that real estate securities can bring additional depth, liquidity and other benefits when combined with other asset classes."
Moss said he believed that listed real estate securities would become popular as part of property-authorised investment funds and unit-linked funds, as well as within defined contribution (DC) pension platforms due to daily pricing requirements.