Potential benefits of real estate in DC plans

7 minute read

March 2022

Share

Sign up to get our insights
Subscribe

REITs offer a long track record of benefiting participants through diversification and long-term total return, characteristics that may be well suited to meet the needs of defined contribution plans.

An evolving asset class: today’s REIT market is driven largely by alternative property types

U.S. REIT sector breakdown, 2000 vs. 2022

US REIT sector breakdown
DC REIT adoption disconnected from other retirement plans

Average real estate allocation

Average real estate allocation
Asset class correlations create potential diversification benefits

25-year correlation matrix

25-year correlation matrix
Since the beginning of the modern REIT era in 1991, U.S. REITs have returned 11.6% per year—0.7% more than the S&P 500 and 6.1% more than U.S. bonds

Growth of $100 and annualized returns since 1991

Growth of 100 and annualized returns since 1991
Adding real estate to a portfolio has historically resulted in higher returns, similar volatility and better risk-adjusted performance

2000–2022

Annualized Total Return Standard Deviation Sharpe Ratio
Country and sector performance dispersion has the potential to benefit active managers

Total return in USD

Total return in USD

FURTHER READING

Plan asset diversification: Why real estate

September 2023 | 6 mins

Low correlations to stocks and bonds and other investment features can make REITs a prudent investment alternative for defined contribution plans.

The Real Estate Reel: Three data points actually driving real estate investing today

September 2023 | 4 mins

Welcome to The Real Estate Reel from Cohen & Steers where we provide three insights on real estate investing in three minutes each month.

Recent CRE transactions signal listed REIT strength

Recent CRE transactions signal listed REIT strength

August 2023 | 6 mins

Listed REITs are now in a position to provide liquidity to the broader commercial real estate market.

2097278