Some investors think the only way to protect against losses in commercial real estate investing is to give up returns by investing in private real estate funds following a core (conservative) strategy. The truth is just the opposite: core funds often lose money for years at a time. Over the 39 1/2 year history of the NCREIF Open-End Diversified Core Equity (ODCE) Index, there have been 139 complete five-year periods, and the average net return on core funds has been negative during 30 of them (22%). And even when positive periods are included, net total returns on core funds have averaged just 7.7% per year. Over the same period, net total returns on listed U.S. equity REIT portfolios have averaged about 12.0% per year, and net returns have been negative during just 7 five-year periods (5%). But portfolios that combined equal allocations to both listed U.S. equity REITs and private core funds would have shown negative net returns during only two five-year periods, both of them including the 2008-2009 liquidity crisis. Combining listed and private core real estate has tended to protect real estate portfolios from losses. Questions? Contact me at bcase@nareit.com.

1. Source: NAREIT® and NCREIF (70% NPI – 30% FTSE NAREIT Equity REIT Index, 1978 – September 2008)
• REITs and core funds have similar, but not identical, long-term investment characteristics
creating diversification within the asset class when combined
• This diversification creates the opportunity for the blended portfolio to earn higher returns
while reducing the potential for negative or low returns
• Since 1977 there have been only two five-year investment periods during which a 70/30
private / public portfolio experienced negative net returns (-0.29% per year during 2006Q3-
2011Q3 and -0.12% per year during 2006Q4-2011Q4).
Public REITs and Core Real Estate Funds are Complements in a
Total Real Estate Allocation
Note: Based on quarterly net total returns of FTSE NAREIT All Equity REITs Index and NCREIF Open-End Diversified Core Equity (ODCE) Index, 1978Q1-2017Q2.
Source: NAREIT analysis of data from NCREIF and IDP accessed through FactSet.
21.7%
40.6%
37.7%
0%1.4%
46.4%
52.2%
0%
5.1%
34.1%
44.9%
15.9%
0%
10%
20%
30%
40%
50%
60%
<0 0 - 10% 10% - 20% 20%+
Percentof5-YearInvestmentPeriods
Avg. Annualized Return
Five-Year Net Returns
100% ODCE, 0% REITs
70% ODCE, 30% REITs
0% ODCE, 100% REITs
0