IPA Investor Survey Finds Continued Demand for Non-Listed REITs and BDCs

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ELLICOTT CITY, Md., Feb. 24, 2014 (GLOBE NEWSWIRE) -- Demonstrating continued confidence in direct investments and the commercial real estate market, a recent survey of over 500 high-net-worth investors found that 83% believe that commercial real estate will outperform or equal the equity market's return over the next five years.

Conducted by the Investment Program Association (IPA), a trade association for non-listed direct investment vehicles, the survey asked high net-worth investors about their current investments in real estate and other vehicles, and their investments in and outlook for non-listed real estate investment trusts (NLRs) and business development companies (BDCs). The study follows a similar survey released by the IPA in March of last year.

Familiarity with non-listed REITs grew from 29% of investors surveyed in March to 35%, while more than 80% of those surveyed rate the vehicle as positive (33%) or neutral (50%). BDCs are viewed as predominantly positive (19%) and neutral (64%), as well. It was notable that investors surveyed claimed greater familiarity with non-listed REITs than variable annuities (25%).

Currently about one-third (32%) of investors surveyed reported that they are invested in non-listed REITs, while about half as many (16%) report allocations to BDCs.

Potential future investment

  • 45% of high net-worth investors who are familiar with non-listed REITs say they plan to include non-listed REITs in their future portfolio;
  • More than one-quarter of investors familiar with BDCs (28%) plan to include them in their future portfolios.

"In this low-income environment, investors are looking for income-generating products and non-correlated diversification," said Kevin M. Hogan, President and CEO of the Investment Program Association. "These investment vehicles can provide investors with non-correlated yield and significant total return over a multi-year investment horizon."

While every non-listed REIT is different, they are designed to be held for five to seven years from inception to exit strategy (liquidation, merger or listing). And while distributions from operations to shareholders can vary widely, many non-listed REITs pay annual distributions of between 4% and 6% and have a favorable tax status. Many BDCs typically have a similar payout ratio.

Last year saw record sales for both non-listed REITs and BDCs. In 2013, total sales of non-listed REITs were estimated to be $19.6 billion, and sales of BDCs were estimated to be $4.8 billion. In addition, it's estimated that $16 billion in equity was returned to investors through stock exchange listings, mergers or other liquidations. (Source: Robert A. Stanger & Co., LLC)

Asset Allocation and Reallocation

According to the IPA's Investor Survey, investors are expecting market shifts both in equities and bonds. When surveyed, nearly three-fifths of investors (56%) expected an equity market correction over the next six months. One in five (19%) had completed or are in the process of reallocating equities. More than one third (37%) believe there will be a shift in equity prices, but not a full-scale correction. On the other hand, more than two in five (44%) don't believe there will be an equity market correction (15%) or have not positioned for an equity market correction within six months (29%).

Turning to bonds, 60% of investors expect a bond market correction over the next six months. One in four have completed a reallocation (13%) or in the process of reallocating their fixed-income assets (12%) in anticipation of a correction. More than one-third (35%) believe there will be a shift in bond market prices, but not a full-scale correction in the next six months. Two in five either believe there won't be a bond market correction (11%) or have not positioned for a bond market correction (29%).

Retirement: The Importance of Income

The survey also inquired into the retirement strategies of high-net-worth investors. Demonstrating the robust need for investment income, 33% of investors surveyed say that it's "absolutely essential or very important" to have current income, while another 43% believe it's "somewhat important." Investors in or within 5 years of retirement place a greater emphasis on current income than those more than five years from retirement.

Market Expectation

Nearly nine in ten (88%) investors surveyed think the equity market will rise in the next five years, with 43% believing it will rise 1 to 5% annually, 41% thinking it will rise 6 to 10% annually, and 4% foreseeing a rise of greater than 10% annually.

Asked to self-characterize the overall risk profile of their portfolios, 44% of respondents said "balanced," 24% said "growth," 12% said "moderate," 11% said "conservative" and 9% said "aggressive."


The survey was conducted by Echo Research from December 11-17, 2013, and polled 500 high-net-worth investors chosen at random and who have an annual household income of at least $150,000 and net investable assets of $250,000 or more. The margin of error is ±4.4% at the 95% level of confidence. The survey was geographically balanced to represent the U.S. population.

For the complete survey results, please visit: http://bit.ly/1gnZe6n

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, and the IPA's member companies operate or have properties in all 50 states. 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