NCREIF vs. NAREIT

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happyking02

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NCREIF: benchmark of direct investment in real estate;
NAREIT: benchmark of indirect investment in real estate;
is that correct? can someone elaborate on the important points regarding these two benchmarks? Thanks!
 
NCREIF - for private investments i.e. partnerships - updated qtr
NAREIT - publically trade REITs - updated monthly
 
+1
NCREIF - value weighted index (usually reported on a quarterly basis); based on property appraisal values (stale price bias)
- benchmark of real estate covering sample of comercial properties owned by large US institutions
- also sub-indices available grouped by real estate sector like apartments, inustrail, office etc
NAREIT - real time, market cap weighted index of all REITs activel traded on NYSE and AMEX
- relatively higher volatility than NCREIF index
 
Also, correlation of NCREIF is artifically low with other asset/indices because the values are not market based. Volatility is also artifically low.
 
how about differences between smoothed vs unsmoothed?
and hedged vs unhedged?
 
NACREIF is smoothed because of appraisal estimates.
Not sure but I think NAREIT can be hedged as REIT are traded on exchange while NACREIF is not.
 
Thanks for all the post, so in summary:
NCREIF - direct; quarterly; value-weighted; low vol, low corr; de-leveraged; smoothed; stale price bias; NCREIF unsmoothed return and vol > NCREIF smoothed return and vol
NAREIT - indirect; publicly traded; real time; market-cap weighted; NAREIT return > NAREIT hedged return
 
happyking02 Wrote:
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> Thanks for all the post, so in summary:
>
> NCREIF - direct; quarterly; value-weighted; low
> vol, low corr; de-leveraged; smoothed; stale price
> bias; NCREIF unsmoothed return and vol > NCREIF
> smoothed return and vol
>
smoothed: stale price
unsmoothed: stale price problem corrected.
NCREIF unsmoothed: vol and historical return> NCREIF smoothed vol and historical return
I would also add non investable index.
> NAREIT - indirect; publicly traded; real time;
> market-cap weighted; NAREIT historical return > NAREIT hedged historical return
and of course investable.
 
GOSH, you guys think it is going to be tested in such detail for such a peripheral concept? then I can’t imagine what they are going to create question for IPS …
 
few practice exams have these real estate stuff in detail but schweser has not covered it this year.
 
lets be realistic. we only have so many brain cells to dedicate and so much things to remember. I would not try to put those cells on real estate. for alternatives, you have other big guys to worry about, HF, commodity and PE
 
i would rather err on the cautious side - it only take a few points to screw up.
 
ndzhai Wrote:
——————————————————-
> lets be realistic. we only have so many brain
> cells to dedicate and so much things to remember.
> I would not try to put those cells on real estate.
> for alternatives, you have other big guys to worry
> about, HF, commodity and PE
But in vignette style questions - They generally focus on 1 section of SS and grill you on that.
 
Add one more point:
NAREIT hedged and NCREIF unsmoothed are better representative of indirect and direct real estate investment respectively.
 
pupdawg82 Wrote:
——————————————————-
> few practice exams have these real estate stuff in
> detail but schweser has not covered it this year.
I do remember CFAI tested both the smooth and hedged things in 09 mock exam with such details and hence there is a chance to see this in the exam.
Like to add this too in case being asked:
–NAREIT (not always reflective of entirely underlying real estate mkt. and is highly correlated with equity mkt. like S&P500)
–NAREIT Hedged (it is the NAREIT without the equity market components–more reflective of entirely underlying real estate mkt. and is less correlated with S&P500)
Also agree with gios that READ ONCE & COVERED to make things simple!
 
I think the chances of getting RE vignette are just as high as getting one for PE, HF, or MF… you have to be ready for the easy ones as well as the harder time consuming things that can be tested…
 
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