Abstract
Purpose This paper compares the benefits of direct international real estate investments in a mixed asset portfolio from the perspective of a passive investor with high and low bond allocation.Design/methodology/approach Due to high data availability and its professionalism, the Norwegian sovereign wealth fund was used as a representative example. Real estate indices from 8 countries were used for the portfolio analysis. The data were desmoothed according to Geltners’s 1993 approach.Findings The optimal real estate ratio in the present case is around 20–55%. However, this is strongly dependent on the bond ratio of the multi-asset portfolio. Portfolios with a high equity ratio benefit more from the additional direct real estate investments than portfolios with high bond ratios.Research limitations/implications A rebalancing of individual stocks and bonds was not analysed. Only indexes from MSCI (Morgan Stanley Capital International) were available.Practical implications Concludes that the weighting of stocks and bonds has a strong influence on the optimal real estate ratio and therefore structural changes that affect this weighting.Originality/value The originality of the paper lies in the analysis with different weights of stocks and bonds, the consideration of 8 real estate markets and the observation period. The results of the work highlight areas of interest for further research.
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