The other day I was watching “March of the Penguins” with my 2-year-old daughter for roughly the 20th time in the last two months. While she was hopelessly waiting for the “birdies to fly,” I suddenly saw a connection between those infamous penguins and real estate mutual funds. Strange, I know, but I was on deadline for this issue and your mind starts to wander after about the fifth go-round with the penguins.

With its cute and cuddly stars, “March of the Penguins” was a surprise hit at the box office. Few movie insiders expected much from a documentary about penguins, but the movie’s returns turned out to be among the highest of all films released in 2005. With their strong performance and stable dividends, the march of the REIT funds was a surprise hit in the investment world. Few analysts expected much from real estate in 2005, but dedicated REIT and real estate mutual funds posted some of the highest total returns of any fund category.

Despite predictions of a sluggish to down year, real estate mutual funds averaged an 11.8 percent total return in 2005, according to Lipper rankings. Real estate was one of the top-performing fund sectors on the year and far exceeded the average U.S. mutual fund return of 6.7 percent.

For a ranking of real estate mutual fund and closed-end fund performance, turn to “Fund Raising.” The article includes insight from top fund managers as well as a look at the rapidly expanding universe of global real estate funds. For now there are no real estate funds in Antarctica, but given how resourceful those penguins are you never know.

Also in This Issue

“Value Proposition” explores the world of private entities acquiring publicly traded REITs and what these deals reveal about the relative value of REIT operating platforms and real estate in the public versus private market.

Veteran REIT investor Ralph Block won the 2005 Real Estate Portfolio Stock Challenge. Block shares his winning strategy and outlook for 2006 in the aptly named “No Knocking This Block.”

In “Capital Markets,” Patrick Donnelly and Arthur Hurley with the Lee Munder Capital Group explain why they feel investors who focus too much on NAV and FFO multiples are looking through the wrong end of the telescope.

Matthew Bechard
Editor-in-Chief