Publications

- November 1, 2018: Vol. 12, Number 10

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Mix your bricks: Right-sizing your public and private core allocations

by Pulkit Sharma and Brian Nottage

A key principle of investing in real estate is right-sizing the mix between private and public allocations. Plan sponsors, asset allocators, and investment managers must decide how to allocate to real estate given its different liquidity flavours, ranging from REITs with daily liquidity, to private core real estate strategies with quarterly liquidity, and where to allocate each within their overall portfolio.

Our research suggests that at the asset class level, a majority allocation to private core real estate (approximately 70 percent to 80 percent), and the balance to public real estate (20 percent to 30 percent), can lead to more resilient investment outcomes over time.

Public real estate is typically placed within an equities or real estate allocation, whereas private core real estate is usually placed in a private markets allocation (e.g., private real estate, real assets, or alternatives). REITs offer daily liquidity, and, on balance, generate similar total retur

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