The Role of Sub-Sector REITS in Mixed-Asset Portfolios in Japan

Abstract

In this paper, I assess the significance, risk-adjusted performance, and portfolio diversification benefits of sub-sector REITs in Japan and their strategic role in a mixed-asset portfolio over 2010–2015. I track the performance of seven sub-sector REITs and compare them with shares, bonds, unlisted property funds, and listed property companies in Japan. The results show that non-traditional REIT sectors, such as hotel and industrial REITs, provide the best risk-adjusted returns among the sub- sector REITs over 2010–2015 and have relatively low correlations with other assets, including shares, bonds, unlisted property funds, and property companies. The findings of this study facilitate additional property investment strategies for many fund managers, institutional investors, and pension funds that have invested or plan to invest in REITs market in Japan.