Investors and wealth managers are placing some pretty big bets on an alternative asset class that is giving fixed income yields a run for their money.
Indeed, capital inflows into nontraded real estate investment trusts (REITs) for the first six months of the year reached a record $10.7 billion, nearly matching the total inflows for all of 2012, according to Robert A. Stanger & Co., an investment bank that specializes in direct investment securities. The firm projects nontraded REITs will raise up to $20 billion for 2013.
"One of the reasons these investments are raising so much money is that real estate can provide a higher yield than is currently available from fixed income securities," said Keith Allaire, managing director of Robert A. Stanger. "They are attractive right now, in an environment where you can't get much yield elsewhere."
Like traditional REITS, nontraded REITs are real estate companies that own income-producing real estate, such as apartments, office buildings, shopping malls or hotels. Modeled after mutual funds, such trusts enable small investors to diversify their portfolios by owning shares in commercial real estate.
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