|Date of event:||26 November 2015|
|Event ends:||26 November 2015|
Globalisation in Real Estate Investment: The trade-off between liquidity and diversification.
This webinar was hosted by Professor Simon Stevenson, Programme Director, MSc Real Estate Finance.
Real estate investment has been totally transformed over the last two decades. In the past the sector was largely dominated by domestic investors with relatively risk-averse investment strategies. That has however, changed quite significantly since the mid-nineties. The asset has not only become more mainstream but it has also gone global. Today cross-border investment constitutes a large proportion of investment volume, and frequently a majority when considering major markets. However, this trend towards globalisation has highlighted a key issue with real estate as an asset class, namely its illiquid nature. Liquidity is one of the most important risk factors in real estate and is a key differentiating feature compared to capital market assets.
The importance placed on liquidity contributes to global capital being concentrated in a relatively small number of key markets. However, if an investor at a global level were to concentrate in these relatively more liquid markets there would also be foregoing some diversification benefits. To begin with these markets are generally office markets, resulting in a reduction in sector diversification. Secondly, the markets concerned are generally the large financial service centres such as New York, London, Tokyo, Paris, Singapore etc. The result is that investors may be focusing in on markets with similar underlying drivers and common trends. The result can be a reduction in economic diversification. Finally, given their nature as financial service centres these markets often provide the least diversification in a mixed-asset context due to their linkages with the capital markets.
In this webinar, Professor Simon Stevenson examines these issues, highlighting not only the potential cost in terms of portfolio performance but also trying to explain why investors do this. The benefits of investing in more liquid markets may be less immediately obvious or quantifiable, but there are sufficiently important for investors to focus their portfolios in these key markets.
The recording of this webinar (59mins) can be viewed online here