The important insights of modern portfolio theory (MPT) come with strong portfolio management advisories that have been emphasised in real estate markets by the global financial crisis and the more recent COVID-19 pandemic.

While in 2007 the Journal of Portfolio Management could celebrate the “integration [of real estate] with the broader capital markets”, we might now be more cautious about claiming “distinct and separate financial behaviour” for the real estate sector. Through the global financial crisis and the COVID-19 pandemic, both out of a clear blue sky, real estate has not obviously offered diversification benefits to global investors. In fact, real estate has been at the epicentre of both 21st century shocks.

A little history

Harry Markowitz, the 1990 Nobel Laureate, published his pioneering analysis of portfolio theory in The Journal of Finance in 1952. A monograph, Portfolio Selection, followed in 1