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The case for listed real estate in a multi-asset portfolio

Outlooks & Research

Raul LEOTE DE CARVALHO
 

Parts of the real estate investment community have in the past overlooked listed real estate as a potential portfolio diversifier. However, our research indicates that listed real estate not only acts as a suitable proxy for the direct sector, but can help improve performance in a multi-asset portfolio.

Parts of the real estate investment community have in the past overlooked listed real estate as a potential portfolio diversifier. However, our research indicates that listed real estate not only acts as a suitable proxy for the direct sector, but can help improve performance in a multi-asset portfolio.

Real estate can contribute significantly to portfolio diversification. Adding listed real estate to a multi-asset portfolio can also generate additional uncorrelated alpha from exploiting inefficiencies in the asset class both at top-down and bottom-up levels.

Moreover, investing in listed real estate offers exposure to thousands of buildings worldwide, lowering the specific risk from relying on how a single property performs while also potentially increasing return potential.

Our research paper, ‘The case for listed real estate in a multi-asset portfolio’,  explains how real  estate can still produce income and growth potential, even in today’s challenging environment.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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