Download presentation
Presentation is loading. Please wait.
Published byMyron Webb Modified over 9 years ago
1
Andrew Baum and David Hartzell, Global Property Investment, 2011 Real estate as an asset class Andrew Baum and David Hartzell, Global Property Investment, 2011
2
What makes real estate attractive? It offers a reasonable return It offers low volatility It diversifies the portfolio It offers an inflation hedge Markets are inefficient
3
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? UK, 1971-2010 Return (%)Risk (%)CV Equities 16.229.8 0.54 Gilts 10.913.3 0.82 Property 11.5 1.00 Source:IPD, PFR 2011 Returns are geometric means, annual data CV = coefficient of variation
4
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? US, 1979-2010 Return (%)Risk (%)CV Equities 13.117.3 0.76 Treasuries 8.29.9 0.83 Property 8.99.2 0.97 Source: NCREIF, S&P, Barclays Capital 2011 Returns are geometric means, annual data CV = coefficient of variation
5
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? Correlations, UK, 1971-2010 EquitiesGiltsProperty Equities1-- Gilts0.571- Property0.28-0.221
6
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? Correlations, US, 1979-2010 Equities TreasuriesProperty Equities1-- Treasuries-0.031- Property0.150.301
7
Andrew Baum and David Hartzell, Global Property Investment, 2011 Diversification? UK, 1971-2010
8
Andrew Baum and David Hartzell, Global Property Investment, 2011 Diversification? US, 1979-2010
9
Andrew Baum and David Hartzell, Global Property Investment, 2011 Diversification? UK, 1990-2010
10
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? Return and risk, 1990-2009 Asset classReturnRisk UK stocks15.930.5 UK gilts11.414.1 UK property11.7
11
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? Correlations, 1990-2009 UK propertyUK stocksUK gilts UK property10.290.05 UK stocks0.2910.59 UK gilts0.050.591
12
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? A low risk portfolio – 11.5% return A medium risk/return portfolio – 13% return A high return portfolio – 14.5% return Limitations?
13
Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? Portfolio return Standard deviationUK propertyUK stocksUK gilts 0.1150.0920.5970.0000.403 0.1300.1400.6150.3150.070 0.1450.2240.3450.6550.000
14
Andrew Baum and David Hartzell, Global Property Investment, 2011 Limitations? Observed mean
15
Andrew Baum and David Hartzell, Global Property Investment, 2011 Limitations? 100% equities 60% property 40% gilts
16
Andrew Baum and David Hartzell, Global Property Investment, 2011 Limitations? Gilts Property Equities
17
Andrew Baum and David Hartzell, Global Property Investment, 2011 Limitations Smoothing Specific risk and sampling error –– can you buy the index? Leverage Illiquidity Fees Execution challenges
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.