Investment Strategies and Timing: Vintage Year Benchmarks Can Provide New Performance Insights
Investors in private equity real estate encounter unique challenges developing and executing an investment strategy when compared to investors in either stocks or bonds. Specifically, the process of buying and/or selling physical assets places constraints on the speed and cost of executing a new strategy or tactically shifting an existing strategy to reflect changing market conditions and investor expectations. If investors are over- or underweight versus their targeted allocation to stocks and bonds, they can quickly and efficiently change their portfolio’s exposure to these asset classes, or to specific sectors or risk strategies within either asset class.
In private equity real estate, the process is much slower and more costly. Indeed, between the time investors make an allocation to private equity real estate and when they actually become invested, the economy, capital markets and property markets can change such that a well-thought-out strategy results in underperform