The growing appeal of nontraditional asset classes

If the pandemic has taught us anything, it has highlighted the need for investors to future-proof their portfolios. To this end, many institutions are reassessing their portfolio allocations. For real estate investors, this includes an investigation of alternative property types because these sectors can enhance portfolio returns in three key ways. First, alternatives can lessen portfolio volatility by providing stable and predictable income across the economic cycle, given their defensive characteristics. Second, because the returns of alternatives and traditional property types are not perfectly correlated, introducing alternatives can mitigate portfolio risk. Third, investors can participate in the institutionalization of these sectors, potentially earning outsize returns as yields compress.

Institutional investment in real estate in Asia Pacific has historically focused on office, retail and industrial properties. These traditional property types account for more than 95