The proliferation of a truly international real estate market facilitated the need for a worldwide benchmark. To meet that demand, NAREIT in 1999 teamed with the European Public Real Estate Association (EPRA) and launched what has quickly become the leading benchmark for global real estate investors to track the performance of listed real estate companies, including REITs, around the world. Early last year, the London-based FTSE Group took over calculation of the global index, now known as the FTSE EPRA/NAREIT Global Real Estate Index Series.

The FTSE EPRA/NAREIT Global Real Estate Index Series covers more than 270 stocks in 28 countries, divided into three regions, Europe, Asia Pacific and North America. The FTSE EPRA/NAREIT Global Real Estate Index Series includes a number of sub-indexes on a real-time basis, with additional breakdowns by country.

"This was our first foray into the specialized world of real estate indexes," says Jerry Moskowitz, FTSE's managing director for the Americas.

FTSE decided to jump into the sector after observing the "terrific" performance of global REIT products, and experiencing significant demand from customers looking to invest in listed commercial real estate worldwide.

"We listened to our clients—the plan sponsors, pension fund managers, etc.—who were starting to think about real estate equities as being a separate asset class," Moskowitz says. "So when there was an opportunity to take over the calculation of the EPRA/NAREIT Global Real Estate Index, we went forward. It fit into our marketing plans and we have been pleased by the attention it has received."

When Portfolio interviewed FTSE's chief executive, Mark Makepeace, last year he was optimistic investors would see the first global ETFs launched. While there may be some in Europe, so far none for U.S. investors have appeared.

The one company getting closer to introducing a product is Barclays Global Investors. "We are in a place where we are ready to launch one. It's just a matter of finding clients who understand the opportunity," notes Amy Schioldager, a managing director with BGI.

Investors have not typically looked globally for their real estate exposure in the past, Schioldager adds. "People are now paying more attention and I expect growth in this area, especially as the number of REITs has increased in foreign countries over the last five years."

When Schioldager talks about the potential market for global ETFs, she often points to the success of the closed-end, global real estate fund launched by ING Clarion.

Launched in February 2004, the ING Global Real Estate Income Fund totals about $3.35 billion in assets.

"If we just look at our total money under management, about 70 percent is a global mandate," says Ken Campbell, managing director for ING Clarion. "And the way world property securities break out is 50 percent domestic and 50 percent non-U.S."

He adds, "our marketing people tell us they find a very strong mandate for a global product. The business has shifted rapidly to a global strategy; at least that is the way it has gone for us."

At the end of last year, Prudential Financial Inc.'s merchant banking group unveiled its own global real estate securities fund. It, too, already has found success with $432 million of assets under management.

Unfortunately, the fund, which invests in publicly traded real estate securities (50 percent U.S., 30 percent Asia and 20 percent Europe), is not available to U.S. investors.

"We looked at the universe of real estate securities worldwide and saw that we could build a truly global, diversified, real estate securities portfolio," explains Rick Romano, a vice president and portfolio manager for Prudential's merchant banking group. "There was enough liquidity and transparency globally to do this." The Prudential fund benchmarks against the S&P/Citigroup BMI Property/REIT Index.

"While real estate for the most part is still a very local business driven by micro-conditions," Romano says, "we saw the opportunity to build a global portfolio and offer added value to our clients."