Asset allocation decision-making practices of institutional real estate funds in a developing economy

2019 ◽  
Vol 38 (3) ◽  
pp. 457-477
Author(s):  
Benjamin Gbolahan Ekemode ◽  
Abel Olaleye
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Asset Allocation ◽  
Investment Decisions ◽  
Decision Making Process ◽  
Allocation Decision ◽  
Real Estate Investment ◽  
Content Type ◽  
The Real ◽  
The Real Estate

Purpose In a bid to broaden the understanding of the real estate investment decision-making framework, the purpose of this paper is to examine the real estate asset allocation decision-making practices of real estate funds in Nigeria, a developing economy. This is with a view to providing information toward enhancing real estate investment decisions. Design/methodology/approach A mixed-methods approach comprising a combination of literature review, expert interviews and semi-structured questionnaire survey is adopted for this study. Through literature review and expert interviews, the asset allocation decision-making process of institutional real estate funds was identified. Based on the literature review and expert discussions, a semi-structured questionnaire was developed and self-administered on fund/portfolio managers of 59 institutional real estate funds in Nigeria to investigate their asset allocation decision-making practice. Data were analyzed using descriptive and inferential statistics for the closed-ended questions while the open-ended questions were content analyzed. Findings The findings revealed that the asset allocation decision-making process utilized by public and private real estate funds follows an opportunistic asset accumulation approach. The decision-making process also varies depending on the nature of the fund. Further findings showed that government policies, political uncertainties and regulatory mechanism motivate asset allocation decisions. Moreover, majority of the sampled real estate funds employed a combination of in-house personnel and external consultants (hybrid), while mean/standard deviation and cash flow analysis (DCF, NPV) were mostly utilized by the funds in making property investment decisions. Practical implications The findings implied that the real estate asset allocation decision-making process of institutional property investors in Nigeria deviates from the normative model of the asset allocation process prescribed in the literature and varies depending on the nature of the real estate funds. As such, familiarization of institutional investors with government policies, political climate and other regulatory mechanism (barriers to entry) guiding the ownership and operation of real estate assets in the country could improve their real estate investment decisions. Originality/value The study complements and extends existing literature on real estate asset allocation decision-making process of institutional investors from the viewpoint of the actors involved in a developing African economy.

An investigation of property-related decision practice of Australian fund managers

2014 ◽  
Vol 32 (3) ◽  
pp. 282-305 ◽  
Author(s):  
Wejendra Reddy ◽  
David Higgins ◽  
Ron Wakefield
Keyword(s):  
Decision Making ◽  
Asset Allocation ◽  
Continuous Process ◽  
Decision Making Process ◽  
Allocation Decision ◽  
Content Type ◽  
Fund Managers ◽  
Investment Level ◽  
Fund Investment ◽  
Managed Funds

Purpose – In Australia, the A$2.2 trillion managed funds industry including the large pension funds (known locally as superannuation funds) are the dominant institutional property investors. While statistical information on the level of Australian managed fund investments in property assets is widely available, comprehensive practical evidence on property asset allocation decision-making process is underdeveloped. The purpose of this research is to identify Australian fund manager's property asset allocation strategies and decision-making frameworks at strategic level. Design/methodology/approach – The research was undertaken in May-August 2011 using an in-depth semi-structured questionnaire administered by mail. The survey was targeted at 130 leading managed funds and asset consultants within Australia. Findings – The evaluation of the 79 survey respondents indicated that Australian fund manager's property allocation decision-making process is an interactive, sequential and continuous process involving multiple decision-makers (internal and external) complete with feedback loops. It involves a combination of quantitative analysis (mainly mean-variance analysis) and qualitative overlay (mainly judgement, or “gut-feeling”, and experience). In addition, the research provided evidence that the property allocation decision-making process varies depending on the size and type of managed fund. Practical implications – This research makes important contributions to both practical and academic fields. Information on strategic property allocation models and variables is not widely available, and there is little guiding theory related to the subject. Therefore, the conceptual frameworks developed from the research will help enhance academic theory and understanding in the area of property allocation decision making. Furthermore, the research provides small fund managers and industry practitioners with a platform from which to improve their own property allocation processes. Originality/value – In contrast to previous property decision-making research in Australia which has mainly focused on strategies at the property fund investment level, this research investigates the institutional property allocation decision-making process from a strategic position involving all major groups in the Australian managed funds industry.

European emerging real estate markets

2016 ◽  
Vol 34 (1) ◽  
pp. 27-50 ◽  
Author(s):  
Martin Haran ◽  
Michael McCord ◽  
Peadar Davis ◽  
John McCord ◽  
Colm Lauder ◽  
...  
Keyword(s):  
Czech Republic ◽  
Real Estate ◽  
Emerging Markets ◽  
Investment Portfolio ◽  
Real Estate Investment ◽  
The Czech Republic ◽  
Content Type ◽  
Real Estate Markets ◽  
The Real ◽  
The Real Estate

Purpose – The purpose of this paper is to improve the transparency of European emerging real estate market dynamics and performance attributes in the wake of the 2007-2008 global financial crisis (GFC). The paper examines the extent and nature of inter-relationships between three emerging real estate markets namely, the Czech Republic, Hungary and Poland as well as determining the rationale for including emerging real estate markets within a Pan-European investment portfolio. The paper affords a timely update following the reinstatement of lending provision for European emerging real estate investment markets in 2014. Design/methodology/approach – The paper employs lead-lag correlations and Grainger causality to examine inter and intra relationships across three emerging European real estate markets, namely the Czech Republic, Hungary and Poland over the period 2006-2014. Optimal portfolio analysis is undertaken to explore the role of emerging real estate markets within the confines of a multi-asset investment portfolio as well as a Pan-European real estate investment portfolio. Findings – The findings demonstrate the opportunities afforded by the European emerging real estate markets in terms of both performance enhancement and risk diversification. Significantly, the findings highlight the lack of “uniformity” across the European emerging markets in terms of their investment potential, with Grainger causality confirming that the real estate markets in the Czech Republic, Hungary and Poland are not endogenous functions of one-another’s performance. Practical implications – This paper makes a considered contribution to the analytical interpretation of European emerging property market performance across the real estate cycle. The research demonstrates that the real estate markets in the Czech Republic, Hungary and Poland exhibit specific investment characteristics which differentiate them from the more developed real estate markets across Europe. Indeed emerging markets have the propensity to serve as both a risk diversifier as well as performance enhancer within the confines of a pan-European real estate investment portfolio. However, as the research clearly articulates, intricate understanding of the attributes afforded by the different emerging markets as well as the divergence in sectoral dynamics/performance is integral to portfolio allocation strategies. Originality/value – Robust academic research on Europe’s emerging real estate markets has been hampered by deficiencies in data provision. This study makes an innovative and timely contribution to redressing the research vacuum through delineated examination of the performance dynamics of three markets namely, the Czech Republic, Hungary and Poland, across the real estate cycle. The role and function of emerging markets is depicted within the confines of a Pan-European direct real estate investment portfolio at the all property level and in terms of sectoral specific allocations comprising retail, office and industrial. The explicit added value of the paper is the propensity to bench-mark the performance of emerging markets real estate markets on a like-for-like basis with developed real estate markets across Europe facilitating the exploration of the role and function of emerging real estate markets within a Pan-European investment context.

How do institutional pension managers consider real estate

2017 ◽  
Vol 35 (1) ◽  
pp. 26-43 ◽  
Author(s):  
Jon R.G.M. Lekander
Keyword(s):  
Real Estate ◽  
Asset Allocation ◽  
Pension Funds ◽  
Real Estate Market ◽  
Organizational Capabilities ◽  
Future Research ◽  
Allocation Decision ◽  
Content Type ◽  
The Real Estate ◽  
Allocation Process

Purpose The asset allocation decision for a pension portfolio needs to consider several, sometimes conflicting, aspects. Most pension managers use models and processes that are developed for the traditional asset classes for analyzing this problem. The purpose of this paper is to investigate how real estate is included in this process, for what purpose and how the real estate portfolio is constructed. Design/methodology/approach Seven individuals responsible for the asset allocation process were interviewed, and their responses were analyzed with regards to organizational options and their real estate strategy. Findings It was found that real estate is held for three different purposes, risk diversification, inflation hedging/liability matching and return enhancement and that the allocation has increased over time. The allocation strategy has evolved at least in part in conjuncture with the organizational structure set in place to overcome real estate market frictions. Research limitations/implications The interviews were geographically limited to pension funds domiciled in Sweden and Finland. Practical implications It is concluded that the organizational capabilities of the pension fund of handling real estate is an important consideration for the ensuing real estate portfolio. Originality/value The originality of this paper lies in that it is based on interviews with individuals who are responsible for the asset allocation decision at large pension funds. The findings of the paper identify areas of interest for future research.

The future of sustainable real estate investments in a post-COVID-19 world

2020 ◽  
Vol 13 (3) ◽  
pp. 455-460 ◽  
Author(s):  
John Pike
Keyword(s):  
Real Estate ◽  
Energy Performance ◽  
Green Energy ◽  
Mandatory Reporting ◽  
Energy Regulation ◽  
Real Estate Investment ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Personal Viewpoint

Purpose The purpose of this paper is to suggest that property investors should engage with governments to influence outcomes. Global collaboration is required from the real estate investment community, working closely with governments and legislators, to provide a clear road map to zero carbon emissions. Covid-19 has shown how quickly governments around the world can react with draconian responses, including widespread lockdowns, when faced with an existential threat. What bigger existential threat is there than climate change? Design/methodology/approach Personal viewpoint from general research. Findings Three pillars of likely government and legislative interventions are identified; namely, increased and enhanced energy regulation and carbon pricing to force a rapid switch to green energy sources for buildings; an enhanced role for Energy Performance Certificates, standardised methodologies and strict enforcement; and mandatory reporting of financial and physical climate risks based on the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. It is suggested that property investors should now engage with governments to influence outcomes. Originality/value Personal viewpoint to encourage greater involvement of the real estate investment community in governmental and regulatory decision making.

Measuring behavioural biases affecting real estate investment decisions in India: using IRT

2018 ◽  
Vol 11 (4) ◽  
pp. 648-668 ◽  
Author(s):  
Richa Pandey ◽  
V. Mary Jessica
Keyword(s):  
Real Estate ◽  
Price Index ◽  
Investment Decisions ◽  
Real Estate Market ◽  
Psychometric Test ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
The Real Estate Market ◽  
Level Of Agreement

Purpose This study aims to investigate the behavioural biases influencing the real estate market investing decisions of normal non-professional investors in India. Design/methodology/approach As the study involves the behavioural data with polytomous response format, psychometric test- graded response model (IRT approach) was used for the study with the help of STATA 14. Multi-stage stratified sampling was used to collect a sample of 560 respondents. The study used a 14-item scale representing behavioural biases derived from two broad behavioural theories, i.e. heuristics and prospect theories. Sample characteristics were checked using SPSS 20. Pre-required assumptions for IRT (i.e. local independence and unidimensionality) were tested by CFA using AMOS 20. Findings Five items, four of which belong to heuristics (anchoring – 2, representativeness – 1 and availability bias – 1) and one belong to prospect theory (regret aversion) are sufficient to measure the behavioural attitude of real estate investors in the Indian scenario. Item discrimination ai ranged from 0.95 to 1.52 (average value 1.29), showing moderate discrimination power of the items. The items have done a pretty good job of assessing the lower level of agreement. For the higher level of agreement, the scale came out to be less precise, with less information and higher standard error of measurement. Research limitations/implications As the behavioural biases are often false, the study suggests the investors not to repeat these nasty biases to improve investment strategies. As they are shared and not easily changeable, understanding these biases may also help them in beating the market by acting as “noise traders”. Practical implications The traditional price index is incomplete in some essential respects. The inclusion of these behavioural biases into the construction of price index will greatly improve the traditional price index, policymakers should seriously think about it. Social implications Shelter is one of the basic needs; a dwelling unit is needed for one to stay in, develop and contribute to economy and society. If investors try to minimise these biases and policymakers keep a track of these while making strategies, mispricing in this sector can be controlled to some extent, which will ultimately help in the well-being of society. Originality/value This study contributes to the limited research by investigating the behavioural biases influencing the real estate market investment decisions of normal non-professional investors. It contributes to the lacking academe on real estate market in India. The study has used a psychometric test, i.e. the item response theory, for evaluating the quality of the items.

Optimal database design for the storage of financial information relating to real estate investments

2016 ◽  
Vol 34 (5) ◽  
pp. 535-546 ◽  
Author(s):  
Sergey Trofimov ◽  
Nikodem Szumilo ◽  
Thomas Wiegelmann
Keyword(s):  
Real Estate ◽  
Data Storage ◽  
Database Management ◽  
Database Management System ◽  
Real Estate Investment ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Related Data ◽  
Investment Process

Purpose – The purpose of this paper is to examine state of the art data storage methods of real estate investment data. Design/methodology/approach – It analyses the process of real estate investment in order to classify and characterize the data it generates. Appropriate literature review is provided. Findings – The results show that a relational database is the most appropriate database management system type for real estate related data. Practical implications – Appropriately structured and modelled data flow can improve the design of the real estate investment process. It is also concluded that adopting an optimal design of IT-solutions could improve informational and operational efficiency of the industry. Originality/value – The subject of this paper lacks sufficient coverage. Popular database management systems are presented and analysed in the context of their suitability for the real estate industry.

Applied Research of Composite Weights – TOPSIS Method in Real Estate Investment Decision

2013 ◽  
Vol 711 ◽  
pp. 452-457
Author(s):  
Yong Ge Xu ◽  
Yang Fu
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Evaluation Method ◽  
Investment Decision ◽  
Ideal Point ◽  
Real Estate Investment ◽  
The Real ◽  
The Real Estate ◽  
Multi Objective ◽  
Investment Decision Making

According to the shortage of the method in real estate investment decision, in order to supplement the deficiency of this one.this paper on the basis of comprehensive consideration of Effects of various factors of real estate project decision, this paper constructs the real estate investment decision-making multi-objective planning evaluation model.Into composite weights,determined by weightthrough the subjective evaluation method combined with the objective evaluation method,and by using the ideal point method (TOPSIS) to evaluate the real estate investment decision-making. This kind of method in view of the present real estate investment decision method is the present situation of the lack of certain to give support and complement, because real estate investment decision is a multi-objective process, so the method is introduced in this paper the method will be more close to the actual situation. Finally, combining with an example, this method is feasible and simple and practical, scientific and reasonable.

The human factor: the “unknown unknowns” in the real estate development process

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Elaine Worzala ◽  
David Wyman
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Human Factor ◽  
Commercial Real Estate ◽  
Real Estate Development ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
The Future ◽  
Decision Making Framework

PurposeVolatility, Uncertainty, Complexity and Ambiguity (VUCA) are terms the military have coined to describe the environment they often operate in. This paper examines how this decision-making framework can be used to better inform real estate investment and development. In celebration of this journal's 40th anniversary, we also explore how VUCA can be related to and expand on the teachings of Dr. James A. Graaskamp who published his seminal piece on the Fundamentals of Real Estate Development (1981) the same year. In that piece, he highlights the importance of paying attention to the human factor, the consumers of real estate.Design/methodology/approachThis is a thought piece on an alternative decision-making framework that can help capture the dynamic environment that commercial real estate investors and developers are currently working in. VUCA captures the difficulty of predicting the future in a world of accelerating, unpredictable change. This is particularly important in today's rapidly changing world caused not only by the current COVID-19 pandemic but also the exponential growth of the proptech industry as well as the increasing risks and opportunities associated with climate change that continues to impact the built environment.FindingsThis is not a traditional research project with empirical findings. We are presenting an alternative framework for thinking about making investment decisions in these current volatile, uncertain, complex and ambiguous times today and in the future. In addition, the importance of multidisciplinary training and the human factor are stressed.Research limitations/implicationsThere are no limitations to this research as it is the ideas of the authors. Implications are to help real estate investors, developers and educators better understand the environment that they are working in.Practical implicationsVUCA captures better the dynamic nature of real estate investments compared to traditional analysis. It helps one better analyze the risks and returns but also to acknowledge that there is a lot you cannot predict and there are many exogenous variables that can, at times, completely change the rules of the game. Flexibility and adaptability are essential tools for working in a VUCA environment. In addition, the human factor plays an increasingly important role and real estate investors and developers that clearly understand this and focus on the consumer will likely be more successful.Originality/valueWe believe that this is the first time that VUCA has been used in the real estate academic literature.

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