Resources
NAV REIT
overview
Spencer J. Couts
University of Southern California
Andrei S. Gonçalves
Ohio State University
FEBRUARY 2024
New Study Offers Important Insight on NAV REIT Performance
IPA is excited to share news on its data, research and education efforts.
Two leading academics have released a groundbreaking study—undertaken with IPA financial support and data provided by Robert A. Stanger & Company—that compares the risk-adjusted performance of non-listed NAV REITs to public real estate, equity and bond indices.
Dr. Spencer J. Couts from the University of Southern California and Dr. Andrei S. Gonçalves from The Ohio State University have published their findings on SSRN. IPA’s President & CEO, Anya Coverman, spotlighted their research in an op-ed for The DI Wire.
Two leading academics have released a groundbreaking study—undertaken with IPA financial support and data provided by Robert A. Stanger & Company—that compares the risk-adjusted performance of non-listed NAV REITs to public real estate, equity and bond indices.
Dr. Spencer J. Couts from the University of Southern California and Dr. Andrei S. Gonçalves from The Ohio State University have published their findings on SSRN. IPA’s President & CEO, Anya Coverman, spotlighted their research in an op-ed for The DI Wire.
Key Findings
The study confirms the following:
Private real estate, represented by NAV REITs, “provided economically large alphas over our sample period relative to portfolios of publicly traded indices” that included equities, bonds, and public real estate. Retail investors could benefit by reallocating their investments from publicly traded REITs to NAV REITs.
To gauge the impact on everyday investors, Drs. Couts and Gonçalves examined how incorporating private real estate through NAV REITs would affect a typical investment portfolio comprising publicly traded REITs, bonds and equities. The authors proposed reallocating 5%, 10% and 20% of the portfolio to NAV REITs.
The study further notes:
According to the research, the alphas from NAV REITs relative to publicly listed REIT indices tend to be positive, large and statistically significant. -
Furthermore, even the least performing NAV REIT still demonstrated a positive and economically significant alpha over publicly listed real estate, bonds and equities. The risk-adjusted returns of NAV REITs also surpassed those of publicly traded REITs:
Private real estate, represented by NAV REITs, “provided economically large alphas over our sample period relative to portfolios of publicly traded indices” that included equities, bonds, and public real estate. Retail investors could benefit by reallocating their investments from publicly traded REITs to NAV REITs.
To gauge the impact on everyday investors, Drs. Couts and Gonçalves examined how incorporating private real estate through NAV REITs would affect a typical investment portfolio comprising publicly traded REITs, bonds and equities. The authors proposed reallocating 5%, 10% and 20% of the portfolio to NAV REITs.
The study further notes:
According to the research, the alphas from NAV REITs relative to publicly listed REIT indices tend to be positive, large and statistically significant. -
Furthermore, even the least performing NAV REIT still demonstrated a positive and economically significant alpha over publicly listed real estate, bonds and equities. The risk-adjusted returns of NAV REITs also surpassed those of publicly traded REITs:
Conclusions from the professors
— Professor Spencer Couts
— Professor Andrei Gonçalves
The research suggests that NAV REITs can enhance the risk-adjusted performance of retail investors’ investment portfolios, highlighting important implications for investors.
— Professor Andrei Gonçalves
The research suggests that NAV REITs can enhance the risk-adjusted performance of retail investors’ investment portfolios, highlighting important implications for investors.