Ace the CFA Investment Practice Test 2025 – Dive into Finance Success!

The correct response is investment trusts, commonly known as Real Estate Investment Trusts (REITs), because they are specifically structured to provide investors with exposure to real estate assets in a public market setting. REITs invest directly in real estate properties or mortgages, allowing public investors to gain access to the income-producing potential of real estate without the need to directly own or manage properties.

Investors in REITs receive dividends from the income generated by the real estate, which typically includes rental income from properties owned by the trust. Additionally, REITs are traded on major stock exchanges, which provides liquidity and transparency akin to other publicly traded equities, making them a unique and attractive vehicle for gaining exposure to real estate markets.

In contrast, while equity funds might invest in real estate companies or related sectors, they do not focus solely on real estate assets and can include a broader range of investments. Limited partnerships might involve private investments in real estate, but they typically lack the liquidity and public market exposure that REITs offer. Real estate mutual funds also invest in real estate but usually do so through stocks of companies engaged in real estate development or management, which may not capture direct real estate asset exposure the same way REITs do.