Investors hate real estate investment trusts, which have lagged the S&P 500 by more than 15 percentage points over the past 12 months, according to a recent article in The Wall Street Journal. However, they love private real estate funds, “which don’t trade on the market and so never are valued at a discount to their assets.”

WSJ reports that institutions and rich investors channeled $71 billion in equity capital into private real estate funds that closed last year (data from Prequin).

“The love-hate situation is driven by two main factors,” according to the article: “Investors have sold REITs because of rising interest rates, which have left their yields less attractive. Meanwhile, investors also have been pouring cash into private equity, hedge funds and other alternative investments on the belief they will outperform public markets.”

The article ponders, however, why investors would choose to invest in private funds when publicly traded REITS are cheaper, explaining that it could be because they believe private funds are less risky and their values less volatile. But risk, the article underscores, “isn’t volatility but rather the chance of a permanent loss of capital.” The better reason for avoiding REITS, according to veteran real estate investors, is because “entrenched” management teams often resist selling assets.

The best strategy for most investors, the article concludes, is “to grab the REITs at current discounts and wait for them to shrink, as they always have. With so much private cash primed to invest in real estate, that could happen pretty quickly.”