The Right Stuff: Rethinking Asset Classes and Diversification After the Crash
Institutional investors have grown accustomed to building portfolios using modern portfolio theory and efficient frontiers with neatly organized asset classes that fit into clearly defined investment buckets. But that is changing. The effects of the financial crisis have affected investors’ overall approach to portfolio construction, and that shift, combined with the unprecedented variety in real estate investment choices, has improved the ability to diversify real estate portfolios.
It also has made it a more complicated exercise.
“There are so many ways to invest in commercial real estate now, and the lines between the traditional asset classes are becoming fuzzier rather than more demarcated,” says Catherine Polleys, principal and co-leader of the global real estate practice at Hewitt EnnisKnupp. “That makes mitigating risk and diversification more complex.”