Investors have long used sector rotation strategies to generate alpha — moving into sectors that are on a growth track and out of those near their peak or contracting. But for real estate, the “lazy Susan” approach of sector strategies may be losing its spin.
Historically, real estate investment managers have allocated capital to real estate by sector and geography to build diversified portfolios and generate risk-adjusted returns. The portfolio strategy of sector rotation among real estate property types and geographies is designed to smooth economic cycles, interest rates and tenant demands.
“It was almost a left-brain/right-brain approach because you thought about those two things equally,” says Mike Byrne, chief investment officer and head of private equity and debt for North America at AEW.
Over the past decade, a handful of property sectors emerged as standouts that benefited from powerful secular shifts that drove outsized returns. Notably, indu
