Benchmarking Performance: What UAE Funds Can Learn from Global REITs

The Investor’s Dilemma

Every investor faces the same question in a different form: how much control are you willing to trade for liquidity? That decision defines far more than a risk profile – it defines the structure itself.

In real estate investment, returns are not only built on market cycles or asset selection. They are engineered by the frameworks that govern capital: how it enters, behaves and exits. In a maturing UAE real estate market, understanding performance by structure has become essential to align investment governance and transparency with global standards and achieve sustainable, risk-adjusted returns in real estate.

Understanding “Performance by Structure”

Performance by structure means the architecture of an investment vehicle determines how consistently it performs. Governance, regulation, payout rules and disclosure standards shape behavior long before market outcomes appear. Two identical assets can yield different results depending on whether they sit inside a listed REIT or a private real estate investment fund.

Recognizing this structural influence allows investors to approach REIT performance benchmarking not as a contest between public and private models but as an analysis of how each converts property value into reliable income and capital resilience.

How Global REITs and Private Funds Differ

Global REITs and private real estate investment funds are designed for different purposes.

• REITs are publicly listed, regulated vehicles built around liquidity, transparency and mandatory payout ratios. They serve investors seeking steady income and daily valuation visibility.
• Private funds are bespoke partnerships between managers and limited partners. They allow discretion in capital deployment, reinvestment and exit strategy – ideal for investors comfortable with longer horizons and greater control.

Neither model is inherently superior. Each reflects a distinct philosophy of capital and investor behavior. What matters is how their internal rules align with purpose and investor intent.

The Mechanics Behind Divergent Outcomes

Payout Ratios and Reinvestment Logic

In REITs, regulation enforces high payout ratios – typically around 90% of distributable income. This ensures predictable dividends but limits retained earnings for reinvestment. Private funds can reinvest cash flows to pursue redevelopment or opportunistic acquisitions, compounding value over time. The trade-off is timing risk and income variability. Investors should align payout discipline with their own liquidity and compounding objectives rather than chasing headline yield.

Leverage and Risk Appetite

Leverage reveals how structure manages volatility. Listed REITs operate within conservative loan-to-value thresholds, often below 50%, protecting dividend stability and credit standing. Private funds set leverage individually at the deal or portfolio level. They can adjust exposure more aggressively, which may enhance returns in expansion cycles but magnify drawdowns in downturns. This contrast reflects leverage as discipline versus leverage as strategy – each suitable for different mandates.

Transparency and Market Behavior

Transparency transforms trust into an economic advantage. REITs disclose occupancy, debt maturity and valuation updates quarterly, allowing investors to assess governance and pricing. This openness can lower cost of capital and improve liquidity. Private funds rely on confidentiality and discretion – valuable for executing complex or contrarian strategies shielded from short-term sentiment. Transparency and privacy are not opposites but complementary tools serving distinct investment cultures.

Global Performance Benchmarks

According to FTSE EPRA Nairet data, global REITs have delivered average annual total returns of around 7–8% over the past decade, closely tracking or exceeding core private fund indices such as MSCI and INREV, while providing daily liquidity. Private funds have achieved higher IRRs in select value-add or opportunistic strategies but with greater dispersion and longer lock-ups. (Sources: FTSE EPRA Nareit Global Real Estate Index Series; MSCI Global Property Fund Index; INREV Annual IRR Report 2024.)

The takeaway is structural, not comparative: each performs best when measured on the terms it was designed for.

Navigating the Structural Comparison

Objection: Comparing REITs and private funds distorts their distinct objectives. Counterpoint: The comparison clarifies how each structure converts real estate value into investor outcomes. Benchmarking reveals how governance, payout discipline and leverage rules influence consistency and risk exposure. For the UAE, where both models coexist, this lens is not about imitation but translation – understanding how design choices shape capital behavior and resilience.

Investor Application: Translating Insight into Action

For HNWIs, family offices and institutional investors active in the UAE real estate market, these actions help align structure with strategy:

1. Map Objectives Before Selecting Structure – Define liquidity, yield and control preferences before allocating. Choose the structure that enforces – not contradicts – those priorities.
2. Demand Structural Transparency, Not Just Financial Reporting – Request clear disclosure on payout policies, leverage caps and decision rights. Governance clarity protects capital more than quarterly returns.
3. Diversify by Structural Exposure, Not Just Geography – Balance liquidity and control by blending REITs with private funds. Structural diversification smooths performance across cycles.
4. Engage Early on Payout and Reinvestment Policy Design – For anchor investors, shape payout mechanics at inception. Clarity on reinvestment limits and distribution cadence reduces future misalignment.
5. Benchmark Governance, Not Just Returns – Evaluate managers on oversight quality, independence and disclosure standards. Strong governance consistently predicts sustainability in risk-adjusted returns in real estate.

Taken together, these principles prepare investors to identify not just what performs, but why it performs – creating a bridge between capital objectives and the frameworks that sustain them.

Looking Ahead: The UAE Opportunity

The UAE real estate market stands at a turning point. Local managers are institutionalizing their platforms and regulators are enhancing disclosure and fund governance standards. Borrowing selected REIT disciplines – clarity, comparability, accountability – can elevate domestic funds without undermining agility. Hybrid structures that combine private fund flexibility with transparent governance can attract broader international capital while preserving entrepreneurial responsiveness.

This evolution embodies performance by structure: institutional discipline powering market innovation. As governance and reporting frameworks mature, they will not only attract global investors but also create a more liquid, trusted ecosystem where both REITs and private funds thrive on equal footing.

Conclusion – Linking Back to The Investor’s Dilemma

The same dilemma that opens this discussion also closes it: control versus liquidity. Every investor resolves it differently, but understanding how structure mediates that choice transforms strategy into foresight. Performance is never just a result of timing, it’s the product of architecture, governance, and discipline.

As the UAE continues to evolve its investment environment, those who design real estate investment funds with transparency and discipline – without losing agility – will set new benchmarks in REIT performance benchmarking and governance standards. The future of the UAE’s real estate market will belong to investors who engineer not only assets but structures that perform.