Small Australian real estate investment trusts (AREITs) have performed better than their larger counterparts as their ability to move easily in and out of less liquid stocks proved to be a competitive advantage, according to research house Lonsec.

This advantage proved to be more important than participation in the heavily discounted capital raisings of last year.

"Smaller funds have significantly outperformed their larger counterparts, demonstrating that the nimbleness of small FUM [funds under management] was a bigger advantage than preferential access to capital raisings at a discount," Lonsec investment analyst Thembi Matabiswana said.

Westfield Group, which accounts for more than 30 per cent of the sector, was one of the worst-performing stocks over the 12 months to 30 June 2010, but few fund managers sold their positions in the group, Matabiswana said.

"Mandate restrictions mean that fund managers continued to hold Westfield in their portfolios."

Lonsec's 2010 review of the AREIT sector included 19 funds.

Only the Vanguard Property Securities Index Fund was awarded the research house's highest rating of highly recommended.

Three funds were added to the sector: the Aviva Investors Listed Property Fund, the Legg Mason Property Securities Fund and the Macquarie Master Property Securities Fund.

"Each of these new funds attained a recommended rating, reflective of the quality of the investment teams and robust investment processes," Matabiswana said.

She noted that over the past two years there had been a significant loss of talent in the sector.

"Senior analysts and portfolio managers are steadily leaving the sector in search of prospects elsewhere," Matabiswana said.

"In most cases, those leaving aren't replaced. Rather, the role is filled internally."