What role should real estate equity and REITs play in retirement saving and investing?
Ann Combs: ERISA does not specify asset classes for investment in employer-sponsored retirement plans. Rather, ERISA requires that investment portfolios are broadly diversified to minimize risk. This allows for expansion of investment options into all types of investment vehicles. Real estate does, and will continue to, provide an investment opportunity for retirement plans, both through REITs and direct investment, as part of a broadly diversified portfolio. Direct real estate investment is more common, and better suited, to defined benefit plans. REITs have made real estate a viable option for defined contribution plans because of their liquidity and diversification. They will continue to play a role although the take-up rates by participants are very low. This suggests more needs to be done to educate workers about the characteristics and benefits of real estate as part of a diversified portfolio. Jamie Behar: Both private and publicly traded real estate equity should be included as
