EUROPE - A report published by the European Real Estate Association (EPRA) has found low or negative correlations between the performance of real estate equities and other asset classes.
The lowest rolling correlation, measured over five years, was with government bonds – an indication conservative bond investors might invest in real estate equities to diversify risk across their portfolios.
However, the report found negative correlation observed between bonds and property equities from 2000 was not constant over time, despite being relatively stable throughout the 1990s.
The report’s author, Professor Steffan Sebastian, also found a growing trend towards correlation between real estate and other equities in the past few years, as well as a similar positive correlative trend between direct and indirect real estate.
The study, compiled for EPRA at the University of Regensburg, measured the FTSE EPRA-NAREIT Global Real Estate Index against the three main asset classes – equities, bonds and cash – and alternatives such as real estate, emerging market equities, hedge funds, private equity and commodities.