When comparing apples to apples, public investment in real estate outperforms private

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Both the private and public markets offer access to real estate investment, but new research suggests that one may be more efficient than the other.

In a new study published in the journal Portfolio Management, authors Thomas Arnold, David Ling, and Andy Naranjo found that in a side-by-side comparison real estate investment funds surpassed the performance of private equity funds in the United States, or PERE, by 165 basis points per year.

The study was based on a sample of 375 PERE funds, which the researchers compared to an index of listed REITs and an index of private real estate funds. To accurately assess the results, the authors used a “leap” approach, comparing the realized return of each PERE fund with the return that index investors would have received over the same investment horizon.

“It’s an apples-to-apples comparison,” said Arnold, former head of real estate at the Abu Dhabi Investment Authority. “And on average, you’d be better off investing in public markets, and that will be significantly better.”

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