Research - OCTOBER 23, 2018

Target allocations to real estate in institutional portfolios continue to climb in 2018

by Jody Barhanovich

Cornell University’s Baker Program in Real Estate and Hodes Weill & Associates have presented the findings of the sixth annual Institutional Real Estate Allocations Monitor, the 2018 Allocations Monitor report.

The 2018 Allocations Monitor focuses on the role of real estate in institutional portfolios, and the impact of institutional allocation trends on the investment management industry. This report analyzes trends in institutional portfolios and allocations by region, type and size of institution.

​A key takeaway of the 2018 Allocations Monitor is that target allocations to real estate in institutional portfolios have continued to climb in 2018 and will continue to increase. Led by institutions in Asia Pacific and EMEA, institutions are also forecasted to increase average target allocations over the next 12 months. In addition, the value of institutional real estate portfolios grew significantly over the past 12 months and despite an increase in actual allocations, institutions remain meaningfully under-invested relative to target allocations.

And after two years of moderating portfolio investment returns, performance increased in 2017, while institutional conviction for the asset class increased in 2018.

Value-add strategies remain the most preferred for institutions, while interest in core strategies have been declining. Cross-border capital flows remain strong as well, as interest shifts from investment in the United States to Europe and Asia.

Lastly, closed-end funds have continued to gain favor with institutional investors and are predicted to stay on this path.

The 2018 Allocations Monitor report consists of 24 questions concerning portfolio allocations to the asset class, current and future investments in real estate, investor conviction, investment management trends, and the role of various investment strategies and vehicles within the context of the real estate allocation (e.g., direct investments, joint ventures, private funds).

You can find the full 2018 Allocations Monitor report here.

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