According to the National Association of Real Estate Investment Trusts ("NAREIT"), the following benefits are generally associated with blending real estate and publicly traded REITs. Furthermore, we believe that adding real estate-related debt further enhances diversification and gives RREEF Property Trust the flexibility to potentially capitalize on additional income opportunities.
However, diversification by asset class or among real estate sectors does not necessarily protect against losses.
A Measure of Downside Protection
The relationship between publicly traded REITs and real estate means that an optimally blended portfolio can provide an important hedge against downturns in the real estate market: when one side of the real estate market is falling, the other can potentially buoy returns for the overall real estate portfolio.
Risk Adjusted Returns
The Past 22 years of historical data demonstrate that an optimally blended real estate portfolio, including approximately one-third in publicly traded REITs, has provided stronger returns, on both an absolute and a risk-adjusted basis, than portfolios simply dominated by real estate investments.
An optimally blended portfolio of real estate and about one-third publicly traded REIT investments produced positive double-digit or single-digit average annual returns for all rolling five-year periods over the past 22 years without a single period of negative returns – even during the most recent real estate market crisis.