CEM research shows that institutional investors of sufficient size tend to outperform the market over long periods of time. The ability to outperform benchmark returns stems partly from the structural advantages; investors with more scale, more actively managed assets, and more assets managed in-house tend to outperform. However, what sources of value lay at the investment level?

Here, we focus on the real estate market, demonstrating that real estate as an asset class offers the potential to add value both in listed and unlisted real estate. Average investment costs in unlisted (i.e., private) real estate exceed the gross value added generated, meaning that institutional investors, on average, underperform their benchmarks net of investment costs. By contrast, for the average listed equity REIT portfolio, nearly half of the 84 basis points of gross value added is returned to investors, providing them with 32 basis points of value added, net of all investment costs.