×

Over 87% of Financial Advisors Who Recommend Non-Listed REITs Find the Investment Effective in Producing Current Income, Reducing Portfolio Volatility, Providing Inflation Protection

Investment Program Association logo

ELLICOTT CITY, Md., Oct. 29, 2013 (GLOBE NEWSWIRE) -- The Investment Program Association (IPA), a trade association for non-listed direct investment vehicles, and Robert A. Stanger & Co., an independent research and consulting firm, today announced the "Public Non-Listed REITs: Use & Effectiveness In Financial Advisor Practices Survey," an assessment of the views of professional financial advisors with respect to non-listed REITs.

Among the findings, the survey reveals that more than two-thirds of the 906 advisor respondents believe that a fully diversified portfolio should include an allocation to real estate. To address this need, a growing number of advisors are recommending non-listed REITs to their clients. Among respondents who use non-listed REITs in their practices, 92% agree that non-listed REITs (NLRs) are an important component of client asset allocation, in large part because of the ability of the product to address a variety of investment objectives.

These advisors who recommend non-listed REITs judge the product "effective" or "highly effective" in achieving five fundamental investment objectives of the typical individual investor:

  • Provide current income (98% of respondents);
  • Reduce portfolio volatility (91%);
  • Provide inflation protection (87%);
  • Provide higher after-tax income (85%);
  • Provided capital growth (62%).

Financial asset products are widely used by the surveyed advisors, with mutual funds (used by 91% of respondents), variable annuities (79%), and exchange traded funds (62%) the dominant financial product forms. Balancing financial asset portfolios with an allocation to non-listed REITs is a strategy employed by the majority of responding advisors.

Investment in non-listed REITs has grown dramatically, from $700 million in assets in 2000 to an expected $19 billion in 2013 – a greater than 25-fold increase. The survey demonstrates that a significant portion of the advisor community surveyed view non-listed REITs as effective tools for achieving portfolio diversification, a major financial goal of individual investors in the U.S.

"The IPA/Stanger Financial Advisor Survey demonstrates that advisors believe non-listed REITs have earned a place in client portfolios because of their investment characteristics, generating positive opinions from both advisors and investors alike," said Kevin Hogan, President and Chief Executive Officer of the IPA. "In addition to providing a window into advisor opinion, the survey provides guidance for ongoing industry efforts to improve the non-listed REIT product and evaluate the effectiveness of the industry's response to market forces and regulatory concerns. Finally, we're looking at this study to help us expand educational resources the IPA produces for advisors and individual investors, including the educational courses we design for financial professionals and the generic product information we make available to investors."

"We're proud to partner with the Investment Program Association to conduct research among financial advisors on the effectiveness and use of non-listed REITs so that we can identify ways to improve the product structure and enhance its potential contribution to a variety of investment strategies," said Keith D. Allaire, Managing Director at Stanger. "The explosive growth of direct investment fundraising reflects demand for the investment characteristics these vehicles deliver: income, portfolio diversification, potential capital growth, and the ability to preserve the purchasing power of retirement assets in an inflationary environment."

Overall, the respondents represent a group of significantly experienced financial professionals, with 79% having ten or more years of advisory experience. Approximately 69% have more than $25 million of assets under management, and 41% have more than $50 million under management.

Over 75% of advisors who use the product in their practices and have observed its actual performance for clients believe that non-listed REITs (NLR) possess each of six positive performance and product attributes:

  • Good record of investment performance (76%);
  • Current income superior to alternative investments (86%);
  • Less volatility than stocks or traded REITs (83%);
  • An important component of client asset allocations (92%);
  • An economic interest in actual properties, which clients find attractive (82%);
  • Elimination of client temptation to sell investments at inopportune times (77%).

Looking to the future, the survey suggests that industry efforts in several areas can contribute to the growth of the market for non-listed REIT products. These areas include expanding product alternatives to include non-listed REITs with more liquidity (daily or quarterly) and higher investor preferences, promoting more frequent valuation transparency with the publication of quarterly NAVs, and enhancing back office efficiency with streamlined subscription automation.

About the survey

The survey was conducted among 8,400 professional financial advisors, with over 900 responding, with the objective of obtaining information to assist the IPA to enhance the educational resources available to financial advisors and individual investors concerning the benefits, risks, suitability and appropriate use of non-listed REITs in investment portfolios; to identify and foster best practices in sales, marketing and investor communications; and to provide direction to product sponsors and broker-dealers as they seek to address the investment needs of the public.

About Robert A. Stanger & Co., Inc.

Robert A. Stanger & Co., Inc., a Shrewsbury, New Jersey-based investment banking firm specializing in real estate and direct participation program securities. The company is a leading source of information and research on the direct investment industry and is regularly involved in real estate mergers and acquisitions, debt and equity financings, real estate appraisals and securities valuations. Stanger is also the publisher of The Stanger Report, Stanger's Market Pulse, and The Stanger Digest, publications focused on the direct investment industry.

About The Investment Program Association

The Investment Program Association (IPA) was formed in 1985 to provide effective national leadership for the direct investment industry. The IPA supports individual investor access to a variety of asset classes not correlated to the traded markets and historically available only to institutional investors. These investments include public non-listed REITs (NLREITs) and Business Development Companies (BDCs), Energy and Equipment Leasing Programs, and private equity offerings. For the last 28 years, the IPA has successfully championed the growth of such products, which have increased in popularity with financial professionals and investors alike. Direct investments are held in the accounts of more than 2 million individual investors. The mission of the IPA is advocating direct investments through education. Access the wealth of IPA educational materials here, or visit the IPA online for more information about becoming a member.

To stay up-to-date with IPA news, follow @IPADirectInvest on Twitter.

CONTACT: Media contact: John McInerney | Makovsky | 212.508.9628 | jmcinerney@makovsky.com

Source:Investment Program Association