How real estate became ‘just another asset class’: the financialization of the investment strategies of Dutch institutional investors

Abstract

ABSTRACTThe managers of a growing wall of money are continuously searching for investment opportunities. The financialization literature describes how this mobile capital puts pressure on commodities, debt, public services and economic activities to transform into investable, tradable, financial products. Regarding real estate, these investigations show how opaque, local, non-standardized goods, highly depending on both local legislation and developments, have been transformed into liquid, globally traded financial assets. By analysing the real estate investment strategies of Dutch institutional investors since the 1980s, this paper shows how a quantitative framework increasingly provides the basis for institutional investors’ real estate investment strategies. Direct ownership of properties has been exchanged into shares of properties, that is, fictitious capital, creating an impetus for ‘objectified numbers’ to measure the performance of these indirect investments. As knowledge about real estate has been outsourced, Dutch institutional investors now perceive real estate increasingly as ‘just another asset class’, thereby increasing leverage and volatility. This paper not only shows how finance ‘financialized’ itself by adopting a quantitative investment perspective, but it also offers an empirical account on how investment properties are transformed into financial assets that put pressure on state agencies to mobilize urban planning to deliver more of such assets.