13 of the worst S&P Performers this year are REITs

[Preston Roach]

I was reading an article on another investing website that broke down the best and worst performers in the S&P 500 so far this year. The list of the 35 worst performers had a whopping 13 that were REITs. Not all of the REITs are in the same market. What does this mean to the Real Estate industry as a whole?

[Chris Mason]

Originally posted by @Preston Roach:

I was reading an article on another investing website that broke down the best and worst performers in the S&P 500 so far this year. The list of the 35 worst performers had a whopping 13 that were REITs. Not all of the REITs are in the same market. What does this mean to the Real Estate industry as a whole?

I mean, if true that might in part validate a theory/conjecture of mine:

Most REI strategies focus on upside value-add potential by a personally managed competent investor (or hand-picked person designated by said person). That hands-on management is a huge part of the returns successful people see. And the failures are often a failure in exactly this area too. So you have large upside potential, and large downside. Higher risk, potentially higher profit. An "average" outcome is less likely, unless you're just buying already turnkey-ready properties at retail price with tenants already in place paying market rents (which of course would be built into a higher price), etc.

With a REIT, we're out of the "hand picked" and "hands-on management" world, and into a committee/bureaucracy world where we're going to error on the conservative/safe/orthodox side with little innovation or one-off highly property-specific type solutions. So we wouldn't really expect to see above-average returns, instead we would expect a lot of perfectly average results since the property management is just doing perfectly average management (tenant screening, repairs, maint, improvement & capex, etc etc). 

That's my little theory, anyways. What you're claiming implies below average results, which my theory doesn't predict.