Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The significance and performance of UK REITS in a mixed-asset portfolio

The significance and performance of UK REITS in a mixed-asset portfolio PurposeUK-REITs are an important property investment vehicle, being the 4th 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-GFC recovery of UK-REITs is highlighted.Design/methodology/approachUsing monthly total 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. FindingsUK-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 implicationsUK-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/valueThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

The significance and performance of UK REITS in a mixed-asset portfolio

Download PDF
20 pages

Loading next page...
 
/lp/emerald-publishing/the-significance-and-performance-of-uk-reits-in-a-mixed-asset-H4Se6WPgRD
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-9269
DOI
10.1108/JERER-08-2015-0032
Publisher site
See Article on Publisher Site

Abstract

PurposeUK-REITs are an important property investment vehicle, being the 4th 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-GFC recovery of UK-REITs is highlighted.Design/methodology/approachUsing monthly total 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. FindingsUK-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 implicationsUK-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/valueThis 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.

Journal

Journal of European Real Estate Research – Emerald Publishing

Published: Aug 1, 2016

References

  • Empirical examination of REITs in Turkey: an emerging market perspective
  • Depreciation, income distribution and the UK REIT