An overwhelming number of advisors said they view non-traded REITs as an important part of portfolio asset allocation, according to a study conducted by the Investment Program Association and Robert A. Stanger & Co. At the same time, the 906 advisors surveyed indicated that there are ways non-traded REIT product sponsors could enhance their investment vehicles that would make them more attractive.
Investment in non-traded REITs has climbed from $700 million in 2000 to an expected $19 billion in 2013, a more than 25-fold increase. Fully two-thirds of the advisors who responded to the survey said they thought a fully diversified portfolio should include an allocation to real estate.
Among the advisors who recommend these vehicles to clients, 92 percent said they were useful in asset allocation because they address various, specific investment objectives. Those objectives included: 1. Providing current income (92 percent); 2. Reducing portfolio volatility (91 percent); 3. Offering inflation protection (87 percent); 4. Providing higher after-tax income (85 percent); 5. Giving clients an opportunity to grow capital (62 percent).
The survey revealed that several product enhancements advisors would like to see included more liquidity (either daily or quarterly), higher investor preferences and earnings coverage, and greater overall transparency and back-office efficiency. IPA president Kevin Hogan acknowledged that there were already a few products offering daily liquidity, but the industry was discussing with regulators what amount of valuation frequency makes the most sense.

Hogan also said the survey would give the IPA insights in how to expand educational resources for advisors, and how to develop more general product information for investors.