IIJournals JPM-Special Real Estate Article Collection | Page 2

Portfolio Strategy and Structure Take Center Stage: “How, What, Where, and When?” Replace “Why?” JACQUES N. GORDON is global investment strategist at LaSalle Investment Management in Chicago, IL. [email protected] YOUGUO LIANG N O T is the global head of research for real estate and infrastructure at the Abu Dhabi Investment Authority in Abu Dhabi, U.A.E. [email protected] GREG M ACK INNON is the director of research at the Pension Real Estate Association in Hartford, CT. [email protected] ASIEH M ANSOUR is a retired real estate economist and consultant in Piedmont, CA. [email protected] 12 general (with real estate being one of the most transparent);1 the rising importance of new categories of investors, such as sovereign wealth funds, which have quickly become important players in the field; and the rise of new investment vehicles and strategies within the asset class. The lead article for the first special real estate issue was “Why Real Estate?” That is, what role could real estate play within a multi-asset portfolio? Now, 10 years on, the role of real estate in asset allocation has been firmly established, and that debate is largely over (albeit not universally over, as investment managers, consultants, and investors alike are still asked to justify real estate allocations on an ongoing basis). But there still remain puzzles about the asset class and gaps in our understanding of risk/return dynamics within real estate portfolios. Moreover, new research questions continue to arise with new trends and changes in the investment environment. The research presented in this special issue address some of these questions. Of course, it is not surprising that questions in need of answers remain, and new ones continue to arise; even equities, with their long history of rigorous academic and industry research, continue to be studied and new insights about them continue to be produced. However, as the general characteristics of real estate as an institutional asset class have become better understood (thanks, in TR IB is an adjunct professor in the Graduate School of Business at Columbia University in New York, NY. [email protected] IS S. MICHAEL GILIBERTO R D is a professor of finance at EDHEC Business School in Nice, France. [email protected] R FRANK J. FABOZZI eal estate is the world’s oldest asset class; people have been holding it, trading it, and fighting over it for all of human history. Yet it is a relative newcomer within institutional portfolios, which explains why it is often classified within the broader category of alternatives. Since The Journal of Portfolio Management published its first special real estate issue in 2003, real estate has become more accepted as a basic building block of a well-diversified institutional portfolio. In fact, since the financial crisis, core real estate has recovered nicely, attracting capital and exhibiting strong returns (see Exhibit 1). Of course, the history of real estate as an institutional asset class does not follow a straight line. Increased interest from institutions in the 1980s was followed by a massive retrenchment in the early 1990s after the crash in property values; many years were required to convince investors that real estate would not fall apart in every recession. As with all asset classes, there is a cyclical component to investors’ acceptance of real estate, with investors following the investment trends of the day. However, while cyclical, post-crisis low interest rates have certainly increased institutional interest in real estate, interest has also been increased by secular trends, which show no signs of abating in the future; these include the expanded role of alternative investments in FO is vice president of research at Cornerstone Real Estate Advisers in Hartford, CT. [email protected] U JIM CLAYTON TI O N JIM CLAYTON, FRANK J. FABOZZI, S. MICHAEL GILIBERTO, JACQUES N. GORDON, YOUGUO LIANG, GREG MACKINNON, AND ASIEH MANSOUR PORTFOLIO STRATEGY AND STRUCTURE TAKE CENTER STAGE SPECIAL R EAL ESTATE ISSUE 2013 Copyright © 2013 Institutional Investor Journals LLC. Not for distribution. JPM-CLAYTON.indd 12 9/17/13 9:05:17 PM