According to a study performed by BlueVault Partners LLC and the University of Texas at Austin's McCombs School of Business, non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%). The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for non-traded REITs, known in the industry as a "liquidity event" or "going full cycle," has heated up this year. Since March, three non-traded REITs have listed on exchanges, with more likely to come, each with limited to no success.
Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the non-traded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.
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