If you go back some 20 years or so, real estate was a small part of an institutional investor’s overall portfolio. The asset class was also somewhat sidelined due its opaque nature. When it came to understanding its risk-return profile, it was thrown by many into the “too difficult” bucket.

Fast forward to today and the picture is quite different. Real estate has a bigger share in portfolios and is more significant in terms of active risk and running costs.

The issue has been exacerbated by an evolution in the way that investors gain exposure to listed asset classes, and equities in particular, with increasing numbers of them choosing to allocate capital to passive index-based strategies. As a consequence, real estate’s share of active risk has risen substantially due to its heterogeneous nature. Another result of a rise in use of cheaper index-based strategies to access other asset classes is that real estate is taking a bigger share of the cost than its AUM s