The evidence on investment managers’ success with market timing is impressive - and overwhelmingly negative," Greenwich Associates’ Charles Ellis wrote in 1985 in Investment Policy: How to Win the Loser’s Game (published by Business One Irwin).

"An unpublished study," Ellis added, "of 100 large pension funds and their experience with market timing found that while all the funds had engaged in at least some market timing, not one of the funds had improved its rate of return as a result of its efforts at timing. In fact, 89 of the 100 lost as a result of ‘timing’ - and their losses averaged a daunting 4.5 percent over the five-year period."

Time, as Ellis noted, is the lever in investing, and when it comes to investing in REITs, lever is always spelled with a capital "L."

As I have noted often in this space over the past roughly six years, if one accepts REITs as the best proxy for the direct ownership of real estate assets (some would argue that REITs are preferable to owning properties outright), and that real estate is a separate asset class, then investors focused on the long term should include REITs (either individually or by owning a real estate fund) in their portfolios. How much real estate to include is a matter of opinion, although most institutions appear to have settled on an allocation of roughly 10 percent.

Though some may focus (and appropriately so) on REITs as a portfolio diversifier, investors should not lose sight of the fact that though they may lack the "sexiness" (or the volatility) of the market’s high fliers, property-linked stocks occasionally shoot out the lights.

Forgetting for now the companies that have performed well since the dawn of the modern REIT era in late 1992/early 1993 (because they haven’t been around long enough as public companies to be in anybody’s "hall of fame"), no one should ignore the long-term - very long term, indeed - track records of two of the industry’s "shining stars."

Though they are very different companies, both Cousins Properties (see page 14) and Vornado Realty Trust have demonstrated - over more than two decades - that real estate doesn’t have to be "boring" - provided one adopts a truly long-term point of view.

- Regular readers of this magazine will notice that it has a new look. Those who are not artistically inclined - such as myself - marvel at those who are. Watching Design Director Brian Duff, Art Director John Whitehead, and Graphic Designer Gary Schenck work their magic on this issue was exciting. They’ve made the entire magazine look better, and they’ve given our graphs and tables a long overdue facelift, making them a lot more user-friendly. It’s easy to soar with the eagles when guys like these are the wind beneath our wings. Thanks for a super job!

We also recently revamped this magazine’s Website. If you haven’t surfed the site recently, point your browser to www.property-mag.com. And if you haven’t already signed up to receive your own copy of the magazine (now published six times annually), click on the "subscribe" icon. You may qualify for a FREE subscription, no strings attached!

Winter 2000 Property Volume V, Number 3
ISSN: 1529-2398