Key Takeaways
- • Bob Steers, current CEO of Cohen & Steers, launched the first real estate securities mutual fund in 1985 while at National Securities and Research Corporation, according to a Nareit podcast episode.
- • Steers said the fund faced significant early hurdles, including building a prospectus from scratch and educating the firm's sales force, and "in the first couple of years, we didn't raise a lot of money."
- • Steers describes the securitization of real estate as a "grand slam home run" and credits the U.S. REIT experience with promoting securitized real estate growth worldwide.
- • Steers downplayed near-term capital inflows from real estate's pending elevation to a headline sector under GICS, but called it "a huge step forward for REITs" because REIT correlation with financial stocks should weaken.
Summary
Bob Steers, current CEO of Cohen & Steers, reflected on launching the first real estate securities mutual fund in 1985 in the latest episode of The REIT Report: NAREIT's Weekly Podcast. At the time, Steers was with National Securities and Research Corporation. He said that because so much real estate was privately owned before the mid-1980s, mutual funds focused on the asset class were discouraged, and investors were not accustomed to viewing real estate as a realistic investment option.
Steers described the launch as "pretty brutal." Beyond the challenge of being first to market with such a product, he had to hire a law firm to draft a prospectus from scratch and train his firm's sales force on the mechanics and characteristics of REIT investing. Early results were modest. "Candidly, in the first couple of years, we didn't raise a lot of money," he said. He noted that the product nonetheless gave salespeople a reason to secure meetings, though they often ended up selling other products.
Looking back roughly thirty years later, Steers characterized the securitization of real estate as a "grand slam home run." According to Steers, the U.S. REIT experience helped drive the growth of securitized real estate globally.
On the pending reclassification of real estate as a headline sector under the Global Industry Classification Standard (GICS), Steers cautioned against expecting large near-term capital flows into REITs. He nonetheless called the change "a huge step forward for REITs," arguing that the correlation between REIT trading patterns and financial stocks is likely to weaken.
Steers described the launch as "pretty brutal." Beyond the challenge of being first to market with such a product, he had to hire a law firm to draft a prospectus from scratch and train his firm's sales force on the mechanics and characteristics of REIT investing. Early results were modest. "Candidly, in the first couple of years, we didn't raise a lot of money," he said. He noted that the product nonetheless gave salespeople a reason to secure meetings, though they often ended up selling other products.
Looking back roughly thirty years later, Steers characterized the securitization of real estate as a "grand slam home run." According to Steers, the U.S. REIT experience helped drive the growth of securitized real estate globally.
On the pending reclassification of real estate as a headline sector under the Global Industry Classification Standard (GICS), Steers cautioned against expecting large near-term capital flows into REITs. He nonetheless called the change "a huge step forward for REITs," arguing that the correlation between REIT trading patterns and financial stocks is likely to weaken.
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