Most experts were under the same assumption—REITs' split from the financials sector this month would shine a spotlight on real estate equities, sparking a buying spree from fund managers looking to diversify their portfolios. And while real estate equities have seen a large inflow of cash (mutual funds poured $2.9B into listed real estate earlier this month), generalist fund managers say REIT valuations are stretched.

Generalist fund managers are non-specialty focused and can invest where they foresee growth. While many of these managers say demand in the new US REIT sector will likely increase in time, at present many are finding better values in different areas, the Wall Street Journal reports.

Investors are also voicing concerns about the low interest rate environment, particularly wary that raised rates will eat away at REITs’ high yields. The MSCI US REIT Index has increased by 14% within the past three years through Sept. 22, and the S&P 500 gained an average 10.7% year-over-year during the same period. [WSJ]