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Will Private Equity and Hedge Funds Replace Real Estate in Mixed-Asset Portfolios?

Author

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  • Soosung Hwang
  • Pa Mitchell
  • Soosung Hwang
  • Paul Mitchell

Abstract

The key question that underlies this paper is whether real estate will continue to have a place in a mixed-asset portfolio, when institutional investors can select from a range of investments outside the core asset classes of bonds and equities. It is often stated that hedge funds, private equity and commodities all offer the benefit of portfolio diversification due to a low correlation with equities. This diversification potential is often used to argue for the inclusion of real estate in a portfolio, hence, if these benefits can be obtained in another way, with the added benefit of liquidity and lower transaction costs, does it imply that real estate allocations will fall? In this paper we investigate in detail the risk and return characteristics of real estate and a selection of alternative assets, the benefits that arise from diversification and role of these assets in an institutional investorís portfolio.

Suggested Citation

  • Soosung Hwang & Pa Mitchell & Soosung Hwang & Paul Mitchell, 2007. "Will Private Equity and Hedge Funds Replace Real Estate in Mixed-Asset Portfolios?," ERES eres2007_154, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2007_154
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2007-154
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    Cited by:

    1. Platanakis, Emmanouil & Sakkas, Athanasios & Sutcliffe, Charles, 2019. "Harmful diversification: Evidence from alternative investments," The British Accounting Review, Elsevier, vol. 51(1), pages 1-23.
    2. Shaun Bond & Paul Mitchell, 2010. "Alpha and Persistence in Real Estate Fund Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 41(1), pages 53-79, July.
    3. Louis Chakkalakal & Ulrich Hommel & Wenwei Li, 2018. "Transport infrastructure equities in mixed-asset portfolios: estimating risk with a Garch-Copula CVaR model," Journal of Property Research, Taylor & Francis Journals, vol. 35(2), pages 117-138, April.
    4. Wouter Thierie & Lieven Moor, 2016. "The characteristics of infrastructure as an investment class," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(3), pages 277-297, August.
    5. Muhammad Jufri Marzuki & Graeme Newell, 2020. "The investment opportunities in the innovation-led listed satellite and telecommunication infrastructure sectors," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 39(3), pages 223-238, April.
    6. Ron Bird & Harry Liem & Susan Thorp, 2014. "Infrastructure: Real Assets and Real Returns," European Financial Management, European Financial Management Association, vol. 20(4), pages 802-824, September.
    7. Muhammad Jufri Marzuki & Graeme Newell, 2020. "A global investment opportunity in non-listed infrastructure for institutional investors," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 39(3), pages 239-255, May.
    8. Surbhi Gupta & Anil Kumar Sharma, 2022. "Evolution of infrastructure as an asset class: a systematic literature review and thematic analysis," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 173-200, May.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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