Crowdfunding REITs: a new asset class for the real estate industry?

The paper aims to study the performance of crowd funding REITs with respect to traditional REITs in order to evaluate the differences in the risk-return profile and their usefulness for a diversification strategy within the indirect real estate investments. The paper considers the crowd funding REITs introduced by after the JOBS act in the United States and evaluate their performance and risk during the time period 2016-2018. Performance achieved by crowdfunding REITs is compared with other types of REITs in order to evaluate their usefulness for constructing an optimal portfolio strategy based on a standard mean variance approach. Results show that the performance of crowd funding REITs is more stable over time with respect to other REITs and the lack of correlation with traditional REITs may be exploited for constructing a more efficient diversified portfolio of indirect real estate investments. Crowd funding REITs have different performance with respect to standard REITs and, especially individual investors, may benefit from including this new investment opportunity in their portfolio. The paper is the first study on the performance of the crowd funding REITs that is evaluating their usefulness for a diversification strategy within the real estate sector.