Real Estate
Enhancing Real Estate Portfolios: A Holistic Approach Combining Public and Private Investments
White Paper
Oct 21, 2020
Exposure to real estate has become increasingly important to investors in recent decades. Central bank stimulus efforts following market and economic shocks—from the Global Financial Crisis of 2007-2008 to today’s COVID-19 pandemic—have resulted in a steady downtrend in interest rates, prompting a global search for income. Investors have looked to real estate for its income generation potential, diversification benefits and attractive total return.
When constructing a real estate portfolio, investors can do so through unlisted (private) or listed (publicly traded) markets. Both types of investment vehicles offer attractive current income, the potential for long-term capital appreciation, and diversification relative to equities and fixed income. They also have the same underlying real estate assets and have generated similar returns over the long term.
Yet many institutional investors have a bias toward private real estate exposures, given the higher volatility of listed real estate. However, we believe the liquidity and flexibility of listed real estate offer a multitude of benefits when constructing a real estate portfolio. In our view, a real estate portfolio that includes listed securities presents the opportunity to more effectively rebalance to strategic allocations, tactically allocate when market dislocations present value opportunities, and enhance diversification.
While every investor has their own unique investment objectives, we believe using both investment vehicles together optimizes the benefits that the real estate asset class provides. In this paper we focus on the similarities and differences between listed and unlisted real estate, and on the potential benefits of combining public and private real estate investments in a portfolio.
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This material is not, and is not intended as investment advice, an indication of trading intent or holdings or the prediction of investment performance. All information is current as of the date of this material. Views and information expressed herein are subject to change at any time. Brookfield Public Securities Group LLC disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources however, Brookfield Public Securities Group LLC does not warrant its completeness or accuracy. This presentation is not intended to, and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, product, investment advice or service (nor shall any security, product, investment advice or service be offered or sold) in any jurisdiction in which Brookfield Public Securities Group LLC is not licensed to conduct business, and/or an offer, solicitation, purchase or sale would be unavailable or unlawful. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.