BERKELEY, Calif. -- According to noted economist and commercial real estate expert Dr. Kenneth T. Rosen, the investment performance of real estate investment trusts during the "modern REIT era" that began in 1993 has shown that REITs provide superior risk-adjusted returns when investment markets are volatile.

The findings of Dr. Rosen, professor at the University of California, Berkeley's Haas School of Business and chairman of Lend Lease Rosen Securities LLC., are detailed in a research paper released by the latter, the real estate securities affiliate of Lend Lease Real Estate Investments, Inc. The paper is titled, "Real Estate Investment Trusts: A Safe Haven in Volatile Financial Markets."

The paper discusses the substantial growth of the REIT sector since the Taubman Realty IPO of late 1992, and examines returns, standard deviations of returns and cross correlations of returns subsequently.

While mean REIT returns (11.5 percent) through the end of 2000 trailed the S&P 500 (14.7 percent), NASDAQ (17.7 percent) and utilities stocks (12.5 percent), they exceeded private real estate (9.1 percent), international stocks (7.2 percent), bonds (7.6 percent), and small-cap stocks (9.9 percent).

Significantly, during the overall stock market downtown of 2000 and so far in 2001, REITs have outperformed all the broad stock indices and have outperformed bonds on a cumulative basis.

The report finds that REITs have a good expected return even in a recessionary environment and have a low cross correlation with domestic, international and technology stocks and with domestic bond markets. Investors holding REITs in a mixed asset portfolio can substantially improve the risk- return characteristics of an overall portfolio.