Property stocks offer good diversification benefits across a range of major investment asset classes, but appear to be particularly interesting to investors in government bonds, according to a major correlation study commissioned by Amsterdam-based European Public Real Estate Association (EPRA). 'Correlation, or to be more precise lack of correlation, lies at the heart of many institutions' asset allocation policy. EPRA wants to encourage a wider understanding of how real estate and real estate securities perform,' said Paul Rivlin, Chairman of EPRA's 'Broadening the Investor Base Committee' and joint chief executive of European real estate investment banking at Eurohypo.
Property stocks offer good diversification benefits across a range of major investment asset classes, but appear to be particularly interesting to investors in government bonds, according to a major correlation study commissioned by Amsterdam-based European Public Real Estate Association (EPRA). 'Correlation, or to be more precise lack of correlation, lies at the heart of many institutions' asset allocation policy. EPRA wants to encourage a wider understanding of how real estate and real estate securities perform,' said Paul Rivlin, Chairman of EPRA's 'Broadening the Investor Base Committee' and joint chief executive of European real estate investment banking at Eurohypo.
The research was carried out by Professor Steffen Sebastian of the International Real Estate Business School at the University of Regensburg in Germany. The study investigated rolling correlations in periods of five years for the quarterly returns of the FTSE EPRA/NAREIT Global Real Estate index series against three classical asset classes: equities, bonds and money (treasury bills), and five alternative assets classes, including direct real estate, emerging market stocks, hedge funds, private equity and commodities. The association's European total return index of property stocks was included in the study, as well as national indices for the US, UK, Australia, France, Sweden and the Netherlands. 'For all asset classes, we see that property stocks show correlations significantly below 1.0 - and in some cases we got negative readings - which indicates the good diversification benefits of investing in real estate equities for a mixed asset portfolio,' Professor Sebastian said.
