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Asset Allocation and Alternative Diversification

Real Assets

A selection of research conducted by EDHEC-Risk Institute in the area of Real Assets.

Alternative Investments for Institutional Investors: Risk Budgeting Techniques in Asset Management and Asset-Liability Management
January 2009
Noël Amenc, Lionel Martellini, Volker Ziemann

In the current context of a short- and probably medium-term downturn in the financial markets, our research in this area seems to be of particular relevance for long-term investors. Our results suggest that real estate and commodities have particularly attractive inflation hedging properties over long-horizons, which justify their introduction in pension funds' liability-matching portfolios. We show that novel liability-hedging investment solutions, including commodities and real estate in addition to inflation-linked securities, can be designed so as to decrease the cost of inflation insurance for long-horizon investors.

This research was undertaken with the support of Morgan Stanley Investment Management.

EDHEC European Real Estate Investment and Risk Management Survey
November 2007
Frédéric Ducoulombier

The EDHEC European Real Estate Investment and Risk Management Survey takes stock of developments in the real estate investment market, reviews academic evidence on allocation to and management of real estate, and analyses the results of a large-scale, pan-European survey of institutional practices.

The survey covers 143 European institutional investors from 19 countries, representing more than 3,000 billion euros in assets under management and over 400 billion euros in real estate assets.

The results show that real estate is perceived as a distinct asset class which covers direct investment, non-listed and listed real estate equity vehicles. The justifications for investing in this asset class are diversification of the overall portfolio, the search for performance, and, to a lesser degree, a hedge against inflation. The quest for alpha appears to be of secondary interest. The main vehicles for exposure to the class are direct investment in the underlying asset, non-listed funds and listed real estate. The role of debt is marginal and allocations to new products (indices, structured products and derivatives) are modest.

This research was undertaken with the support of Aberdeen Property Investors and Groupe UFG.