If there remained any adherents to the efficient market hypothesis, the recent events surrounding Dubai World should finally kill off such dated views. It can hardly be considered surprising that an entity that has in excess of US$26 billion of debt — much of it real estate–related — would eventually face some form of distress.

Asian pension and sovereign wealth funds have become increasingly active in U.S. and European real estate markets in recent years, and distressed deals thrown up by the global financial crisis have served only to whet their ongoing appetite for involvement in these overseas markets as they adjust their portfolio strategies in order to best manage their liabilities in these uncertain economic times.

At the start of 2009, very few investors could have predicted the strength of the recovery of listed real estate securities. Developers, particularly in China, Hong Kong and Brazil, were among the first to recover on the back of a rapid improvement of the housing environment and, in some cases, distressed valuation levels. Differentiation among companies will likely become even more important in 2010 as returns will vary significantly depending on various corporations’ ability to deliver earnings according to expectations.