The analysis of the investment performance across various real estate categories over the last 25 years (1998–2022) is based on a unique dataset that includes more than 200 public and private pension funds, with total assets under management exceeding $4 trillion. One of the key advantages of this dataset is that it captures the actual, realized performance of investments selected by fund managers and trustees—not theoretical or modeled outcomes.
It compares the mixed and net average annual total returns, correlations, and volatilities for 12 asset categories, with necessary adjustments for time lags associated with illiquid investments (such as private real estate and private equity). Additionally, it compares the performance of different types of investments in private real estate, such as internally managed portfolios, core strategies, value-added/opportunistic strategies, and investments through fund of funds.
Clear superiority of REICs in terms of returns
According to the 2024 CEM Benchmarking study, Real Estate Investment Companies (REICs) recorded the second highest average annual return among the 12 asset categories examined, confirming their long-term investment value. In defined benefit pension funds, REICs outperformed private real estate by more than 2% on an annual basis, highlighting their competitive advantage.
Moreover, REICs showed relatively low correlation with equities, providing substantial diversification benefits within broader investment portfolios. Finally, REICs outperformed most private real estate investment strategies, including core, value-added/opportunistic, and fund of funds strategies, reinforcing their position as an efficient and effective choice in the alternative investment space.
During the period covered by the study (1998–2022), the real estate of REICs (Real Estate Investment Companies) achieved the second highest average annual net return, reaching 9.74%. In contrast, investments in private real estate yielded an average return of 7.66%, which is more than 200 basis points (2%) lower compared to REICs, highlighting the comparative effectiveness of listed investment companies.
On the other hand, the lowest returns among the 12 asset categories examined were recorded by hedge funds and tactical asset allocation (TAA) strategies, broad-based US bonds, and the category of other fixed-income securities in the US. It is noted that the latter category includes cash investments, which partly explains its low return.
