Why are funds likened to REITs in terms of liquidity?

Funds are often likened to Real Estate Investment Trusts (REITs) in terms of liquidity primarily because they typically provide mechanisms for investors to buy and sell shares upon request. This feature is a critical aspect of investment vehicles like mutual funds and REITs, which offer investors the ability to enter or exit their investment positions relatively easily compared to certain other types of investments, such as private equity or hedge funds that may have longer lock-up periods.

The liquidity available in funds and REITs stems from their structured approach to share issuance and redemption. This allows investors to convert their investments into cash more swiftly than in illiquid assets. For example, in many cases, investors can redeem their shares in a mutual fund or a REIT at the end of the trading day at the net asset value, making it easier to manage their investment liquidity.

Comparatively, options that suggest limitations on when and how shares can be bought or sold—such as fixed intervals, restrictions to public investors, or bans on share transfers—highlight characteristics of less liquid investments. These limitations are not applicable to funds and REITs, which are designed to facilitate investor transactions more fluidly.