Research Insight - The Erosion of The Real Estate Home Bias - November 2014
categories: Americas, EMEAI, Asset Allocation and Asset Liability Management, Factor and Risk Modeling, Investing (Investment Management), Risk Management, RMA, Asia Pacific, PMA, Multi-Asset Class, Research Paper, SHEPARD Peter, LIU Yang, Real Estate, HOBBS Peter, AUSSANT Jean-Martin, general
The home bias of real estate investing is starting to change. The world’s largest Sovereign Wealth and Pension Funds are leading the change with explicit global real estate investment mandates seeking to exploit the richer global opportunity set and its diversification benefits. In this Research Insight, we use the Barra Private Real Estate Model (PRE2) to examine the drivers of risk and return in the international real estate markets, and find that fragmentation of the global markets has led to low correlations across markets, and much larger opportunities for diversification than global equity or real estate in the home market.