When it comes to investing in real estate investment trusts (REITs), active asset managers are ahead of the game. This is demonstrated by the long-term outperformance of the largest active REIT strategies worldwide – both in absolute terms and risk-adjusted. This is the conclusion of a recent whitepaper by Hazelview Investments, a global alternative investment manager specialising in real estate.
In their analysis, the authors cite three reasons that speak in favour of the superiority of active management in this asset class. “Real estate is one of the few areas where active asset management continues to offer a meaningful and, above all, repeatable advantage over a passive approach,” emphasises Claudia Reich Floyd, Head of Hazelview’s European office in Hamburg, one of the authors of the whitepaper.
Ten active strategies outperformed the index over (almost) all time periods
As evidence, the experts cite the net returns achieved by the ten largest global REITs strategies (by assets under management) compared to the benchmark. Over 15, ten, seven, five and three years, these two handfuls of active strategies outperformed their benchmark index (FTSE EPRA NAREIT Developed Total Net Return Index); the benchmark only outperformed over one year (to 30 September 2025).
Over the entire 15 years under review, the active strategies achieved 151 basis points higher returns than the index, annually. And their “success rate”, as defined by the international rating agency Morningstar, is also impressive: 43.5 per cent of actively managed outlasted and outperformed their passive competitors over the past decade (source: Morningstar Manager Research, Q2-2025).
These three practices generate alpha for REITs
There are three main practices with which active managers can excel, and which are often the reasons for outperformance against the benchmark (alpha):
Tactical positioning in certain regions and (niche) sectors: Active managers, unlike indices, can overweight certain regions and markets worldwide as well as sectors within the property industry, which they consider to be particularly successful. The authors cite senior housing in North America as an example – demand there has far exceeded supply.
Investments in companies that are not REITs but are nevertheless part of the real estate sector. These include commercial real estate brokers such as JLL and CBRE, which do not appear in any REITs index but nevertheless benefit from long-term outsourcing trends and the management of properties on behalf of clients.
Participation in initial public offerings (IPOs) and anticipation of benchmark adjustments. Shares are only included in indices once they have reached a minimum size and liquidity. However, active managers can invest in real estate stock at the IPO and capture what may be the strongest phase of performance prior to subsequent index inclusion. They can also participate in announced changes in the index before these occur.
“For these reasons, we view active management as an important pillar of investment in the public real estate sector,” conclude the experts from Hazelview. Earlier this year, they had already dealt with “Five good property investments for 2025” in their outlook. In a few weeks, Hazelview will publish its “Global Outlook 2026”.
