Home is where the heart (and $$) is…

Why Real Estate Should Be in Your Portfolio

BNP Paribas Investment Partners’ Jan Willem Vis argues that having listed real estate in your portfolio can lift your returns.

Investors who have been inclined to dismiss listed real estate as an attractive asset class since the financial crisis should perhaps reconsider, as they could be missing out on the important roles that listed real estate can play in multi-asset portfolios. Not only can it operate as a proxy for direct real estate while generating diversified returns – with a stronger income component arising from high dividends – it can also provide some protection against rising interest rates, which may come as a surprise to some.

Evidence shows that, over the long term, investment in listed real estate offers an exposure to direct real estate (including real estate physical property investments and unlisted funds) while addressing the well-known illiquidity problems associated with owning a portfolio of individual buildings. The advantages in terms of liquidity are particularly important because of the potential it offers to exploit, through active management, the inefficiencies that exist among countries, markets and sub-sectors.

Chart 1: Decomposition of total annualised average returns into price returns and reinvested dividends for five regions: US, UK, Eurozone, Asia and developed countries. This graph shows the decomposition of returns for listed real estate in these regions based on the FTSE EPRA NAREIT indices.

Author: kimhuntkw

We specialize in Real Estate in the Pleasanton, Dublin and Livermore areas of the East Bay in California

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