The National Association of Real Estate Investment Trusts has launched a campaign to educate financial professionals about REITs, according to Abby McCarthy, Nareit senior vice president of investment affairs, who is in charge of the program.
Nareit created a website, REIT Resources for Financial Professionals, available here or at REIT.com/quickfacts/, that is a tutorial on REITs. The site also provides information from Morningstar that advisors can use with clients, McCarthy said.
“REITS are the third-largest asset class after equities and bonds, making up 14% of the market,” she said. “Approximately 83% of advisors use REITs in their clients’ portfolios, but many do not allocate enough of the portfolio to commercial real estate."
A well-balanced portfolio can include 5% to 15% of investments in commercial real estate with the percentage declining as the person ages and switches to a larger percentage of fixed income, she said.
“We have found that some advisors shy away from more investments in REITs is because they believe they are highly correlated to other equities. Our research and the research of others has shown REITs have a low correlation to other equity markets. Advisors also may believe REITs are more volatile than they really are,” McCarthy said.
The major advantage of using commercial real estate in a portfolio is diversification, she added.