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More efficient and liquid than direct real estate

Investors seeking exposure to real estate have to decide whether to invest directly in real estate or indirectly through listed property. According to a study of the University of Maastricht1 in the Netherlands, returns have been higher and management costs have been lower for listed real estate compared to direct real estate, subject to marginally higher volatility.

Indeed, the 20-year study has demonstrated a 422bp annual outperformance with a modestly higher volatility. Listed real estate has performed 10.92% annually vs. 6.70% for direct real estate. Hence, listed real estate has been more ‘efficient’ than direct real estate. Costs in basis points over the same period have amounted to 32.75bp for listed real estate vs. 72.47 for direct real estate.

1 Value Added From Money Managers in Private Markets? An Examination of Pension Fund Investments in real Estate May 2012, University of Maastricht, The Netherlands, based on a survey on the behaviour of 880 pension funds over 20 years 1990-2009


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