Publications

- May 1, 2019: Vol. 13, Number 5

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Private equity provides best risk-adjusted returns

by Marek Handzel

Despite its moderate absolute returns, private real estate equity provides the best risk-adjusted results when compared to other real estate investment strategies, corporate bonds and equities.

In a study that assesses returns, volatility and correlations for real estate investment strategies in relation to fixed income and equities in Europe, called Peripheral Property Perspectives, AEW has concluded that private real estate equity has the highest risk-adjusted return when based on the Sharpe ratio. The asset class is given a 0.97 ratio in the paper, with its closest rival assets being real estate equities (0.68) and corporate bonds (0.64). Corporate equity is the lowest scoring asset class with a 0.38 ratio.

AEW says that private equity has been much less volatile over the last 10 years when compared with corporate equities (LCE) and real estate equities (LREE). The average quarterly returns for AEW’s LREE index was 3.7 percent, significantly ahead of the

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