Active management in the real estate market is delivering higher absolute returns and stronger risk-adjusted performance, according to a new report from Hazelview Investments.
Active global REITs outperformed passive strategies across a 15-year time span by 151 basis points per year, the report said. An initial $10,000 investment grew 24 per cent in over the studied period to $25,718, representing an outperformance of $4,929.13 compared to passive returns.
With the exception of a one-year time period (negative 1.4 per cent), active managers recorded higher return-to-risk ratios than passive benchmarks over a three-year (9.9 per cent), five-year (6.1 per cent), seven-year (4.6 per cent) and 10-year (5.3 per cent) period.
Passive REIT ETFs showed variance due to high concentration in U.S. large-cap REITs with only the iShares global REIT ETF offering broader global diversification, the report said, which discounts their inexpensive fee perspective.
“Real estate remains one of the few areas in global capital markets where active management reliably creates value,” said Sam Sahn, managing partner and portfolio manager at Hazelview Investments, in a press release.
Read: REITs offering alternative real estate strategy access to institutional investors: expert