GLOBAL - Institutional investors in real estate should consider the full range of options offered by the capital markets, according to John Gellatly, head of global real estate multi-manager at Aviva Investors and chair of the Investment Property Forum (IPF).
In a panel session at this year's IPD/IPF Property Investment Conference in Brighton, he said: "While it is possible to invest globally in different ways - direct, pooled, listed, derivatives and CMBS, clients say they don't want CMBS because they don't want the credit risk, saying that is the responsibility of the fixed income team.
"They don't want REITs because that is done by the equity manager, and they don't want derivatives because they want to make the call on asset allocation.
"Clients and consultants still think of real estate as bricks and mortar - they do not consider how they can access the return attributes of property using these different vehicles and strategies, which are more attractively priced at different points in the cycle relative to one another. There is a huge need for education."
The panel also considered the future of REITs.
Mark Young, head of real estate advisory Oriel Securities, said: "Most of the bigger REITs in the UK are ineptly run and have been for some time.
"There are lots of cracking companies in the UK that will deliver fabulous returns and are far better value than the larger REITs.
"UK REITs need to get a lot bigger if they are still to exist in 2020, and the sector needs to get bigger if it is to be of relevance to the majority of its owners - non-property people."
Young said REITs increasingly would need to be cross border and sector specific and added that the capital structure would play a very important role at times.
"The cash flow - or lack of it - in the UK REIT market will be a key feature of UK REITs compared with US REITs," he said.
Gellatly added: "When investors think about buying equities, they don't think about using different types of equities for different strategies."