The story “Individual Investors Find Withdrawal Window Shut for Property Funds” (Real Estate, April 14) raises important questions about the nature, benefits and transparency of nontraded real estate investment trusts (REITs).
While some want to suggest that the new breed of these funds is just like the old, the current situation is proving that wrong. As the article points out, many of the largest nontraded REITs have ample liquidity to satisfy redemption requests, even amid one of the most unprecedented economic crises our country has ever faced. The uncertainty plaguing financial markets is not unique to nontraded REITs or even real estate.
Nontraded REITs, often bought by investors because of their lower correlation to the equity markets and close alignment to the value of underlying assets, are showing themselves to be reliable holdings in times of stress. This benefit is a direct result of the product’s evolution over the past decade, not in spite of it.
Other benefits of this evolution have also accrued to individual investors, including increased transparency, more robust disclosure and more frequent valuations. Nontraded REITs and their value as a buy-and-hold investment are also well-aligned with the majority of individual investors today who, according to Gallup, view the current environment as a time to hold onto current investments and wait for a recovery.
Individual accredited investors may decide to invest in a nontraded REIT for many reasons. Each of those decisions should be made in close consultation with a trusted financial professional and with transparent access to robust disclosures. Doing so is easier and more investor friendly today as a result of nontraded REITs’ proactive evolution.
President & CEO
Institute for Portfolio Alternatives