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Article
Publication date: 4 February 2019

Frank Kwakutse Ametefe, Steven Devaney and Simon Andrew Stevenson

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended…

Abstract

Purpose

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended funds, to provide the liquidity required by institutional investors, such as UK defined contribution pension funds. This is with the objective of securing liquidity while not unduly compromising the risk-return characteristics of the underlying asset class. This paper considers the best mix of liquid assets at different thresholds for a liquid asset allocation, with the performance then evaluated against that of a direct real estate benchmark index.

Design/methodology/approach

The authors employ a mean-tracking error optimisation approach in determining the optimal combination of liquid assets that can be added to a real estate fund portfolio. The returns of the optimised portfolios are compared to the returns for portfolios that employ the use of either cash or listed real estate alone as a liquidity buffer. Multivariate generalised autoregressive models are used along with rolling correlations and tracking errors to gauge the effectiveness of the various portfolios in tracking the performance of the benchmark index.

Findings

The results indicate that applying formal optimisation techniques leads to a considerable improvement in the ability of the returns from blended real estate portfolios to track the underlying real estate market. This is the case at a number of different thresholds for the liquid asset allocation and in cases where a minimum return requirement is imposed.

Practical implications

The results suggest that real estate fund managers can realise the liquidity benefits of incorporating publicly traded assets into their portfolios without sacrificing the ability to deliver real estate-like returns. However, in order to do so, a wider range of liquid assets must be considered, not just cash.

Originality/value

Despite their importance in the real estate investment industry, comparatively few studies have examined the structure and operation of open-ended real estate funds. To the authors’ knowledge, this is the first study to analyse the optimal composition of liquid assets within blended or hybrid real estate portfolios.

Details

Journal of Property Investment & Finance, vol. 37 no. 1
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 2 March 2015

Alex Moss and Kieran Farrelly

The purpose of this paper is to provide a better understanding of the performance implications for UK DC pension fund investors who choose to combine global listed and UK…

Abstract

Purpose

The purpose of this paper is to provide a better understanding of the performance implications for UK DC pension fund investors who choose to combine global listed and UK unlisted real estate in a blended allocation relative to a pure unlisted solution.

Design/methodology/approach

Blended listed and unlisted real estate portfolios are constructed. Investor risk and returns are then studied over the full 15 year sample horizon and distinct cyclical phases over this period using a number of risk-return metrics. Performance is then contrasted with that of a pure unlisted solution, as well as UK equity market and bond total returns over the same period.

Findings

A UK DC pension fund investor choosing to construct a blended global listed and UK unlisted real estate portfolio would have experienced material return enhancement relative to a pure unlisted solution. The “price” of this enhanced performance and improved liquidity profile is, unsurprisingly, higher portfolio volatility. However, because of the improved returns, the impact upon measured risk adjusted returns is less significant.

Practical implications

Relatively liquid blended listed and unlisted real estate portfolios create efficient risk and return outcomes for investors.

Originality/value

This study uses actual fund rather than index data (i.e. measures delivered returns to investors), has chosen a global rather than single country listed real estate allocation and is focused on providing clarity around the real estate exposure for a specific investment requirement, the UK DC pension fund market.

Details

Journal of Property Investment & Finance, vol. 33 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 2 August 2013

Martin Haran, Peadar Davis, Michael McCord, Terry Grissom and Graeme Newell

The purpose of the paper is to examine the role of securitised real estate within the confines of a multi‐asset investment portfolio and to identify if indeed securitised…

Abstract

Purpose

The purpose of the paper is to examine the role of securitised real estate within the confines of a multi‐asset investment portfolio and to identify if indeed securitised real estate can afford investors the desired investment benefits of direct property investment whilst mitigating many of the recognised barriers and risks.

Design/methodology/approach

The paper employs a suite of analytical techniques; lead‐lag correlations are utilised to examine market dynamics between listed and direct real estate markets across jurisdictions. Grainger causality and co‐integration techniques are applied to examine the nature and extent of relationships between investment markets with optimal portfolio analysis utilised to explore the role of securitised real estate and the optimum weighting allocation within the confines of a multi‐asset investment portfolio.

Findings

The findings demonstrated the unresponsive nature of direct real estate markets relative to listed real estate markets – in some jurisdictions the extent of lag can be as much as 12 months. Whilst the research did not identify a Grainger causality relationship between listed and direct property markets across the jurisdictions, co‐integration analysis does infer trend reverting price behaviour in the long run (ten years) between direct and listed real estate markets. Optimal portfolio analysis serves to demonstrate the crucial role of real estate within a multi‐asset portfolio in terms of both mitigating risk and enhancing performance over the ten‐year time series. Indeed, the optimal portfolio analysis highlights the compatibility and complementarity of listed and direct real estate within a multi‐asset investment portfolio.

Originality/value

The question if securitised real estate is a viable proxy for direct property investment is as inconclusive as it is enduring. In contrast to the large embodiment of previous work, this paper adopts an international market perspective depicting the global nature of securitised real estate investment markets whilst also reflecting on the extent of co‐integration between asset classes and across jurisdictions during a period of extreme financial and economic distress.

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Article
Publication date: 16 March 2020

Arvydas Jadevicius

The study is set to explore a viability for substituting part of cash holdings within European open-end diversified core equity (ODCE) real-estate funds with listed real

Abstract

Purpose

The study is set to explore a viability for substituting part of cash holdings within European open-end diversified core equity (ODCE) real-estate funds with listed real-estate exchange-traded fund (ETF) alternative. Academically, this research bridges a knowledge gap within private real-estate market research.

Design/methodology/approach

First, the study investigates the correlation between ODCE and ETFs to assess series interdependence. Next, the study generates a blended ODCE and ETF portfolio and examines its performance by quantifying a) the contribution to returns and b) the diversification benefits.

Findings

The findings suggest that a 1 percent spare cash allocation to an ETF increases ODCE fund returns by few bps although the diversification benefits are more nuanced.

Practical implications

Real estate and other investment vehicles are encouraged to review their cash-holding strategies. Real estate, infrastructure or private equity vehicles could designate a small proportion of available cash to asset class-specific ETFs. These cash substitutes are likely to increase returns and could strengthen diversification, although there are some caveats. For ESG-conscious investors, sustainable ETFs and associated passive conduits with strong responsible investment characteristics could provide cash replacement alternatives at the margin.

Originality/value

The study adds additional evidence on the contested issue of blending private and public real estate.

Details

Journal of Property Investment & Finance, vol. 38 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 5 February 2018

Graeme Newell and Muhammad Jufri Marzuki

German real estate investment trusts (REITs) are a small but important property investment vehicle in the European REIT landscape, offering German commercial property…

Abstract

Purpose

German real estate investment trusts (REITs) are a small but important property investment vehicle in the European REIT landscape, offering German commercial property investment exposure in a liquid format, compared to the more property development-focused German listed property companies and the popular German open-ended property funds. The purpose of this paper is to assess the emergence of the German REIT market and the risk-adjusted performance and portfolio diversification benefits of German REITs in a mixed-asset portfolio over 2007-2015. The post-global financial crisis (GFC) recovery of German REITs is highlighted. Enabling strategies for the ongoing development of the German REIT market are also identified.

Design/methodology/approach

Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of German REITs over 2007-2015 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of German REITs (and German property companies) in a mixed-asset portfolio. Sub-period analysis is used to assess the post-GFC recovery of German REITs.

Findings

German REITs delivered lesser risk-adjusted returns compared to German stocks over 2007-2015, with limited portfolio diversification benefits. However, since the GFC, German REITs have delivered strong risk-adjusted returns, but with continued limited portfolio diversification benefits with German stocks. German REITs also out-performed German property companies. Importantly, this sees German REITs as strongly contributing to the German mixed-asset portfolio across the portfolio risk spectrum in the post-GFC environment.

Practical implications

German REITs are a small but important market at a local, European and global REIT level. The results highlight the major role of German REITs in a German mixed-asset portfolio in the post-GFC context. The strong risk-adjusted performance of German REITs compared to German stocks sees German REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as many investors (e.g. small pension funds) use German REITs (and German listed property companies) to obtain their German property exposure in a liquid format, as well as the increased importance of blended property portfolios of listed property and direct property.

Originality/value

This paper is the first published empirical research analysis of the risk-adjusted performance of German REITs, and the role of German REITs as a listed property vehicle in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision making regarding the strategic role of German REITs in a portfolio.

Details

Journal of Property Investment & Finance, vol. 36 no. 1
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 August 2016

Graeme Newell and Muhammad Jufri Bin Marzuki

UK-Real Estate Investment Trusts (REITs) are an important property investment vehicle, being the fourth largest REIT market globally. The purpose of this paper is to…

Abstract

Purpose

UK-Real Estate Investment Trusts (REITs) are an important property investment vehicle, being the fourth largest REIT market globally. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of UK-REITs in a mixed-asset portfolio over 2007−2014. The post-global financial crisis (GFC) recovery of UK-REITs is highlighted.

Design/methodology/approach

Using total monthly returns, the risk-adjusted performance and portfolio diversification benefits of UK-REITs over 2007–2014 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of UK-REITs in a mixed-asset portfolio. Sub-period analysis is used to assess the post-GFC recovery of UK-REITs.

Findings

UK-REITs delivered poor risk-adjusted returns compared to UK stocks over 2007–2014 with limited portfolio diversification benefits. However, since the GFC, UK-REITs have delivered strong risk-adjusted returns, but with continued limited portfolio diversification benefits with UK stocks. Importantly, this sees UK-REITs as strongly contributing to the UK mixed-asset portfolio across the portfolio risk spectrum in the post-GFC environment.

Practical implications

UK-REITs are a significant market at a European and global REIT level. The results highlight the major role of UK-REITs in a UK mixed-asset portfolio in the post-GFC context. The strong risk-adjusted performance of UK-REITs compared to UK stocks sees UK-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as many investors (e.g. small pension funds, defined contribution [DC] funds) use UK-REITs to obtain their property exposure in a liquid format, as well as the increased importance of blended property portfolios of listed property and direct property.

Originality/value

This paper is the first published empirical research analysis of the risk-adjusted performance of UK-REITs and the role of UK-REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of UK-REITs in a portfolio.

Details

Journal of European Real Estate Research, vol. 9 no. 2
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 1 July 2019

Muhammad Jufri Marzuki and Graeme Newell

The Belgium Real Estate Investment Trust (REIT) market was created primarily to facilitate a transparent, professionally managed and fiscally efficient market, providing…

Abstract

Purpose

The Belgium Real Estate Investment Trust (REIT) market was created primarily to facilitate a transparent, professionally managed and fiscally efficient market, providing access to the European property markets. Being the 2nd oldest REIT market in Europe, it has undergone many evolutionary changes over the years that add to its considerable stature as a sophisticated investment opportunity. This includes an increased recent focus on the social infrastructure property sectors such as healthcare, care facilities and nursing homes, consistent with the evolving investment mandates requiring stronger integration of environmental, social and governance (ESG) aspects in the investment strategy formulation. The purpose of this paper is to highlight the strategic transformation of Belgium REITs and empirically assess their performance attributes over 1995–2018. Sub-period performance dynamics of Belgium REITs in the pre-global financial crises (GFC) (1995–2007) and post-GFC (2009–2018) contexts are provided.

Design/methodology/approach

In total, 23-year monthly total returns over 1995–2018 were used to analyse the risk-adjusted performance and portfolio diversification potential of Belgium REITs. The traditional mean-variance portfolio optimisation model using the ex-post returns, risk and correlation coefficient of Belgium REITs and other financial assets was developed to determine the added-value benefits of Belgium REITs in a diversified investment framework. The analysis was further extended to cover the sub-periods of pre-GFC (1995–2007) and post-GFC (2009–2018).

Findings

The results of the analysis provide a strong investment case for Belgium REITs, as they are able to deliver a discernible premium in the total return performance, superior risk-adjusted returns and strong diversification benefits with the stock market in a long-term investment horizon. Broadly consistent results are similarly observed in the sub-period analysis over varying market conditions. Importantly, the role of Belgium REITs in a diversified investment framework was also empirically validated, as they enhanced the mixed-asset portfolio performance comprised of the traditional asset classes of stocks and bonds across a broad portfolio risk-return spectrum. Dividend yield was also found to be a key component of the financial performance of Belgium REITs.

Practical implications

The Belgium REIT market has evolved to become the 5th largest market in Europe by the capitalisation volume. This is mainly due to the robust regulatory support and innovations since its debut which have resulted in a polished framework that is both supportive and attractive to financial players and investors. The broad direct consequence of this paper is to highlight the performance attributes of Belgium REITs, adding clarity to the ongoing discussion regarding the viability of European REITs as a liquid and tax transparent route for institutional investors to obtain their property exposure. The strong dividend yield and ESG/social infrastructure focus of Belgium REITs sees Belgium REITs well-placed going forward to meet the evolving investment mandates from major investors.

Originality/value

This paper is the first empirical investigation that elucidates the risk-adjusted performance and role of Belgium REITs as an important property investment opportunity. It equips investors and practitioners with an independent and comprehensive empirical validation of the strategic role of Belgium REITs in a portfolio. Well-informed and practical property investment decision making regarding the use of Belgium REITs for access to the property asset class is the main outcome of this paper.

Details

Journal of Property Investment & Finance, vol. 37 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 6 August 2018

Muhammad Jufri Marzuki and Graeme Newell

Spanish real estate investment trusts (REITs) emerged as an important and rapidly expanding property investment vehicle, against the backdrop of improving Spain…

Abstract

Purpose

Spanish real estate investment trusts (REITs) emerged as an important and rapidly expanding property investment vehicle, against the backdrop of improving Spain macro-economic fundamentals and commercial property market. This sees Spanish REITs being the 3rd largest REIT market in Europe, offering access to important Iberian and European property assets, with the added benefits of transparency, governance and liquidity. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of Spanish REITs in a mixed-asset portfolio over August 2014–February 2018.

Design/methodology/approach

Using monthly total returns, the risk-adjusted performance and portfolio diversification potential of Spanish REITs over August 2014–February 2018 are assessed. Asset allocation diagrams are used to assess the role of Spanish REITs in a mixed-asset portfolio.

Findings

Spanish REITs delivered strong risk-adjusted returns compared to stocks over August 2014–February 2018, but with limited portfolio diversification benefits. Compared to bonds, Spanish REITs offered competitive risk-adjusted returns and excellent diversification benefits. Importantly, this sees Spanish REITs as strongly contributing to the Spanish mixed-asset portfolio across the portfolio risk spectrum.

Practical implications

The 2012 Spanish REIT regulatory changes have been pivotal in providing a supportive environment for Spanish REITs’ growth. Spanish REITs are now a significant market in a European context. The results highlight the major role of Spanish REITs in a Spanish mixed-asset portfolio. The strong risk-adjusted performance of Spanish REITs compared to stocks sees Spanish REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as an increasing number of investors have utilised Spanish REITs to obtain their property exposure in a liquid format in recent years.

Originality/value

This paper is the first published empirical research analysis of the risk-adjusted performance of Spanish REITs, and the role of Spanish REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of Spanish REITs in a portfolio.

Details

Journal of Property Investment & Finance, vol. 36 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 July 2005

David Fleming

Whilst criticisms of current research methodology and method when assessing the performance of a building can be suggested, no practical or achievable alternatives have…

Abstract

Purpose

Whilst criticisms of current research methodology and method when assessing the performance of a building can be suggested, no practical or achievable alternatives have been found. It suggests that existing approaches fail to consider the often‐irrational perceptions of humans who inhabit the buildings. This paper proposes a change in both methodology and method when assessing building performance.

Design/methodology/approach

The method developed for this research project involved a four‐stage process which was designed to achieve consistency with the methodology. Fundamental to the methodological approach taken and developed in this research is the concept of beta press. The variables used for analysis must be those chosen by participants in the building and not the alpha press variables of non‐participant observers. The method chosen for collection of the participant variables was focus group meetings incorporating a modified Delphi selection exercise. A survey sought information on the occupier's personal working space.

Findings

There are a number of variables that are performing well in terms of matching occupiers' rating of importance and their satisfaction with the subject building. There are also a number of variables where perceived performance exceeds importance. Only where there is a significant difference in the distribution is there an issue to be identified.

Research limitations/implications

Further research could be to develop this methodological approach to investigate the possibility of correlating the results with investment performance of buildings. This may seek to establish relationships between yields, rent levels and occupancy rates with the perception mapping of the occupants. In the short‐term research of this nature may be used by organisations to better understand the behaviour of their workforce in the work environment. It can isolate issues or clusters of issues that can be addressed and immediate results can be considered.

Originality/value

This research has provided a justification and rationale for an alternative methodological approach to the evaluation of building performance. Previous research in this field has been largely positivist and has not considered a behavioural dimension.

Details

Facilities, vol. 23 no. 9/10
Type: Research Article
ISSN: 0263-2772

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Article
Publication date: 4 April 2016

Graham Squires, Norman Hutchison, Alastair Adair, Jim Berry, Stanley McGreal and Samantha Organ

– This research aims to provide an insight into large-scale real estate projects in Europe and how they are using a more innovative blend of finance.

Abstract

Purpose

This research aims to provide an insight into large-scale real estate projects in Europe and how they are using a more innovative blend of finance.

Design/methodology/approach

The methodology involved a mix of desk-based study, interviews and case studies. Interviews were held with financiers, policymakers, developers, investors, fund managers and academics. The specific case projects were Battersea Power Station Development in London; Leipziger Platz site in Berlin; and the Lammenschans site in the city of Leiden, The Netherlands.

Findings

The research found that there is growth in the blend of financial products used in real estate development within large-scale mixed-use projects. This new blend is set with greater equity financing, often from domestic and foreign consortiums generating institutional funds – alongside private debt financing – that utilise a mix of large-scale multi-bank finance.

Practical implications

The scale of the challenge in financing real estate development allied with capital budget constraints has meant that the appetite for innovative finance mechanisms has gained considerable momentum in practice and policy. This research investigates current examples in development finance and provides a discussion of the opinion of key multi-stakeholder participants in the individual cases, and trends more strategically at a broader level.

Originality/value

This detailed study of three major development sites and at a more broader strategic level is significant, in that it provides a better understanding of the differing blends of finance that are being used.

Details

Journal of Financial Management of Property and Construction, vol. 21 no. 1
Type: Research Article
ISSN: 1366-4387

Keywords

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