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Healthcare property has become an important alternate property sector in recent years for many international institutional investors. The purpose of this paper is to assess the risk-adjusted performance, portfolio diversification benefits and performance dynamics of French healthcare property in a French property portfolio and mixed-asset portfolio over 1999–2020. French healthcare property is seen to have different performance dynamics to the traditional French property sectors of office, retail and industrial property. Drivers and risk factors for the ongoing development of the direct healthcare property sector in France are also identified, as well as the strategic property investment implications for institutional investors.

Using annual total returns, the risk-adjusted performance, portfolio diversification benefits and performance dynamics of French direct healthcare property over 1999–2020 are assessed. Asset allocation diagrams are used to assess the role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio. The role of specific drivers for French healthcare property performance is also assessed. Robustness checks are also done to assess the potential impact of COVID-19 on the performance of French healthcare property.

French healthcare property is shown to have different performance dynamics to the traditional French property sectors of office, retail and industrial property. French direct healthcare property delivered strong risk-adjusted returns compared to French stocks, listed healthcare and listed property over 1999–2020, only exceeded by direct property. Portfolio diversification benefits in the fuller mixed-asset portfolio context were also evident, but to a much lesser extent in a narrower property portfolio context. Importantly, this sees French direct healthcare property as strongly contributing to the French property and mixed-asset portfolios across the entire portfolio risk spectrum and validating the property industry perspective of healthcare property being low risk and providing diversification benefits in a mixed-asset portfolio. However, this was to some degree to the loss or substitution of traditional direct property exposure via this replacement effect. French direct healthcare property and listed healthcare are clearly shown to be different channels in delivering different aspects of French healthcare performance to investors. Drivers of French healthcare property performance are also shown to be both economic and healthcare-specific factors. The performance of French healthcare property is also shown to be different to that seen for healthcare property in the UK and Australia. During COVID-19, French healthcare property was able to show more resilience than French office and retail property.

Healthcare property is an alternate property sector that has become increasingly important in recent years. The results highlight the important role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio, with French healthcare property having different investment dynamics to the other traditional French property sectors. The strong risk-adjusted performance of French direct healthcare property compared to French stocks, listed healthcare and listed property sees French direct healthcare property contributing to the mixed-asset portfolio across the entire portfolio risk spectrum. French healthcare property’s resilience during COVID-19 was also an attractive investment feature. This is particularly important, as many institutional investors now see healthcare property as an important property sector in their overall portfolio; particularly with the ageing population dynamics in most countries and the need for effective social infrastructure. The importance of French direct healthcare property sees direct healthcare property exposure accessible to investors as an important alternate real estate sector for their portfolios going forward via both non-listed healthcare property funds and the further future establishment of more healthcare REITs to accommodate both large and small institutional investors respectively. The resilience of French healthcare property during COVID-19 is also an attractive feature for future-proofing an investor’s portfolio.

This paper is the first published empirical research analysis of the risk-adjusted performance, diversification benefits and performance dynamics of French direct healthcare property, and the role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of French direct healthcare property in a portfolio; particularly where the strategic role of direct healthcare property in France is seen to be different to that in the UK and Australia via portfolio replacement effects. Clear evidence is also seen of the drivers of French healthcare property performance being strongly influenced by healthcare-specific factors, as well as economic factors.

US commercial property is an important investment opportunity for institutional investors. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of US commercial property (both direct property and REITs) in a mixed-asset portfolio over 1994-2016. The 2009-2016 post-GFC recovery of US commercial property is specifically highlighted.

Using quarterly total returns, the risk-adjusted performance and portfolio diversification benefits of US commercial property over 1994-2016 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of US commercial property in a mixed-asset portfolio. Sub-period analysis over 2009-2016 is used to assess the post-GFC recovery of US commercial property.

US commercial property delivered mixed results over 1994-2016; direct property gave the best risk-adjusted performance, while US-REITs performance was hampered by high volatility. Since the GFC, both forms of US commercial property have delivered stronger risk-adjusted returns with improved diversification benefits, especially in the context of an inter-property investment strategy. However, US-REITs did not improve their diversification benefits with the stock market over this period. This sees US commercial property as an important component in the US mixed-asset portfolio in the post-GFC environment, with a much stronger role exhibited by US direct property in the post-GFC mixed-asset portfolio.

US commercial property emerged from the GFC as a stronger and more robust property investment opportunity, with both the direct property and US-REITs fully recovered to their pre-GFC performance level in 2012. The results highlight the major role of US commercial property in a US mixed-asset portfolio in the post-GFC context. The superior risk-adjusted performance of US commercial property sees both direct and listed US commercial property contributing significantly to the mixed-asset portfolio throughout the entire risk-return spectrum, particularly direct property. Given the increased capital flows into the US property market since the GFC, this is particularly important as many investors, both local and international, use direct and listed property investment opportunities as conduits for their significant US commercial property exposure.

This paper is the first published empirical research analysis that specifically assessed the post-GFC performance and role of US commercial property in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision making by institutional investors regarding the strategic role of US commercial property in a mixed-asset portfolio in a post-GFC context.

As the prolonged effect of the COVID-19 pandemic has materially impacted investment returns significantly, it is more crucial than ever for institutional investors to redefine their property portfolios using assets with better investment management potential and meaningful diversification benefits. The “alternative asset revolution” is gaining traction in the property investment space internationally among institutional investors due to the shifting investment attitudes towards the alternative property sectors. Australia's $205bn healthcare property sector is at the forefront of this revolution due to its societal significance, as well as its attractive investment qualities. This paper investigates the institutional investor management of the Australian healthcare property sector via both the direct and listed channels and empirically analyses its investment attributes.

Using the unique Morgan Stanley Capital International/Property Council of Australia quarterly data set for Australian direct healthcare property over 2006–2020, the risk-adjusted performance and portfolio diversification potential direct healthcare property and listed healthcare were assessed. A constrained mean-variance portfolio optimisation framework was used to develop a six-asset portfolio scenario to analyse the portfolio added-value benefits of both direct healthcare property and listed healthcare in a mixed-asset investment strategy. A similar set of analysis was performed using the post-global financial crisis (GFC) quarterly time series of 2009–2020 to investigate the healthcare asset class' performance dynamics in the post-GFC investment timeframe.

The results indicate that direct healthcare property and listed healthcare offer two key advantages for institutional investors in managing their property portfolios: (1) a stable yet superior risk-adjusted performance and (2) significant portfolio diversification potential in managing their property portfolios. Importantly, both direct healthcare property and listed healthcare provided valuable contributions in strengthening an investment portfolio's performance. The post-GFC sub-period analysis revealed a consistent conclusion regarding the healthcare asset class's performance attributes.

This is the first research that provides an independent empirical examination of the strategic importance of Australian healthcare property as a maturing alternative property sector that can serve both investment and environmental, social and governance goals of investors. This research presents a positive investment prognosis for the Australian healthcare property sector to achieve its institutionalised status as a mainstream asset class of the future.

Investment in Australia’s property market, whether directly or indirectly through Australian real estate investment trusts (A-REITs), grew remarkably since the 1990s. The degree of segregation between the property market and other financial assets, such as shares and bonds, can influence the diversification benefits within multi-asset portfolios. This raises the question of whether direct and indirect property investments are substitutable. Establishing how information transmits between asset classes and impacts the predictability of returns is of interest to investors. The paper aims to discuss these issues.

The authors study the linkages between direct and indirect Australian property sectors from 1985 to 2013, with shares and bonds. This paper employs an Autoregressive Fractionally Integrated Moving Average (ARFIMA) process to de-smooth a valuation-based direct property index. The authors establish directional lead-lag relationships between markets using bi-variate Granger causality tests. Johansen cointegration tests are carried out to examine how direct and indirect property markets adjust to an equilibrium long-term relationship and short-term deviations from such a relationship with other asset classes.

The authors find the use of appraisal-based property data creates a smoothing bias which masks the extent of how information is transmitted between the indirect property sector, stock and bond markets, and influences returns. The authors demonstrate that an ARFIMA process accounting for a smoothing bias up to lags of four quarters can overcome the overstatement of the smoothing bias from traditional AR models, after individually appraised constituent properties are aggregated into an overall index. The results show that direct property adjusts to information transmitted from market-traded A-REITs and stocks.

The study shows direct property investments and A-REITs are substitutible in a multi-asset portfolio in the long and short term.

The authors apply an ARFIMA(p,d,q) model to de-smooth Australian property returns, as proposed by Bond and Hwang (2007). The authors expect the findings will contribute to the discussion on whether direct property and REITs are substitutes in a multi-asset portfolio.

This paper aimed to examine the return/risk performance of direct and indirect real estate (listed property stock) in the Nigerian real estate market and analyzed the short-term integration between the two classes of real estate assets. It also established whether investors could achieve diversification benefits by combining both assets in a portfolio.

The data utilized comprised annual returns on direct real estate calculated from the rental and capital values of 226 direct commercial properties obtained from property valuers in Lagos, Nigeria, for a period of January 1999-December 2014. The appraisal-based direct real estate returns were de-smoothed using the Geltner (1993) procedure. The annual returns of indirect real estate were also computed from the transactions of listed property stock on the Nigerian Stock Exchange for the study period. The return-risk profiles were also broken down into short- and medium-term sub-periods, comprising 3, 5, 8 and 12 years to reflect the level of volatility in the market, whereas the nature of the short-term relationship between the two real estate assets classes was tested using Granger causality technique.

The results revealed that listed property stock performed better than unsmoothed direct real estate on a risk-adjusted performance basis. The performance profile, however, varies over the different sub-periods considered. Short-term integration analysis showed that there was no bidirectional relationship between direct and listed property stock, implying diversification and risk reduction possibilities in combining both assets with other asset classes in a domestic asset portfolio. Overall, the results confirm the findings of previous study that listed property stocks return is segmented from the direct real estate market upon which its pricing and trading in the stock market are based.

The conclusion of the study suggests that investors could achieve improved performance by investing in listed property stocks than direct real estate in the Nigerian real estate market. The inclusion of both assets in a domestic mixed-asset portfolio could also be expected to offer diversification and risk reduction benefits.

This is one of the few studies that examine the short-run integration between direct real estate and listed property stocks with a focus on an emerging African market.

This paper critically assesses the relative merits of indirect and direct methods of international property investment. Despite similarities in the underlying asset base, each offers different qualities in terms of information costs, diversification, management and transaction costs, liquidity, volatility and quality of performance measurement. It is argued that direct investment will only be justifiable where investors are confident that they have the ability to identify underpriced assets, can manage these assets as effectively as local companies and can handle the investment risks associated with such lumpy, illiquid assets. It is concluded that for many investment funds, indirect investment in specialist property investment companies would seem to offer a more suitable method of gaining exposure to international property markets. In general indirect markets are more transparent, information costs are lower, liquidity is higher (with consequent implications for portfolio asset allocation decisions) and performance measurement is less problematic.

Hong Kong is one of the most dynamic property markets in the world, and now provides the economic gateway to China. Using style analysis, the level of direct property in Hong Kong property company performance is shown to be approximately 15 per cent over 1984‐2000, with the level of direct property increasing to approximately 25 per cent in recent years. The level of direct property in Hong Kong property company performance is significantly below that seen for the USA, Europe and Australia. This highlights a number of key strategic property investment issues over 1984‐2000, relating to the level of direct property in Hong Kong property company performance. Also assesses the level of direct property at the individual property company level, as well as the property company sector level, further emphasising the strategic role of Hong Kong property companies in an investment portfolio. This research complements the previous research by Brown and Chau on excess returns in the Hong Kong property market, as well as highlighting the issues and role of both direct and indirect property for inclusion in diversified investment portfolios; these being key areas of Gerald Brown's extensive property research agenda.

Discusses the performance of equities, direct property and property shares and provides a background for comparing the advantages and disadvantages of these two distinct types of property investments. Highlights the similarities and differences between property shares and direct property. Concludes that within a multi‐asset portfolio both make valuable contributions to the structure of the portfolio, but that property shares are more applicable to smaller ones and are useful for shifting investment weightings quickly.

Examines the investment performance of Singapore real estate and property stocks over the past 25 years. Evaluations using coefficient of variation (CV), Sharpe index (SI) and time‐varying Jensen abnormal return index (JI) suggest that real estate outperformed property stocks on a risk‐adjusted basis. Results also indicate that risk‐adjusted investment performance for residential properties remained superior to performance for other real estate types and property stocks. Further analysis using time‐varying JI reveals that the excess return performance of property stocks could differ significantly from that of direct properties, and performance of property stock led real estate market performance. Finally, the performance implications arising from the study are evaluated.

Retail property is an important property investment sector. The purpose of this paper is to assess the importance of retail property type, size and region in Australian retail property and the strategic role of direct retail property and retail listed property trusts (LPTs) in a mixed‐asset portfolio.

This paper analyses the performance of retail property in Australia over 1995‐2005 for both direct and indirect retail property. Risk‐adjusted performance analysis is used to assess the added value of retail property in a mixed‐asset portfolio, with the portfolio diversification benefits of retail property also assessed.

The paper finds that retail property and retail LPTs have delivered substantial risk‐adjusted returns and portfolio diversification benefits over 1995‐2005. The retail property sub‐sectors of retail property type, size and region have different performance characteristics; particularly highlighting the substantial role of geographic diversification as the most effective portfolio diversification strategy for retail property investors. Direct retail property and retail LPTs are also identified as having different performance characteristics and each contributing substantially to an institutional property investment strategy.

Previous retail research has been at an “overall” Australian retail property level. This paper rigorously assesses retail property at a retail sub‐sector level regarding retail property type, size and location. This level of analysis enables more informed and practical investment decision‐making regarding the role of retail property in a mixed‐asset portfolio for both direct and indirect retail property as part of an institutional property investment strategy.