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The right blend: Both listed and unlisted real estate have roles to play in multi-asset defined contribution pension funds
Recent evidence identifies that there has been a reluctance by a number of UK and European institutions to incorporate listed real estate into their real estate allocations. This can be attributed to a number of reasons, ranging from the different volatility profile of listed real estate to practical aspects of integrating a team that invests in both listed and unlisted vehicles.
This is despite the significant body of work undertaken by both practitioners and academics on the beneficial impact of adding listed real estate to a portfolio. It has been shown that REITs can act as both a return enhancer and a diversifier in a mixed-asset portfolio, and that adding listed real estate to an unlisted portfolio can not only enhance returns but also liquidity. REITs are seen to produce real estate returns over the medium (three-year) term, as well as having useful predictive properties. While investors can benefit from the clear long-term relationship between direct and listed real e