Real Estate Investor Magazine South Africa July 2015 | Page 59

between these respective asset classes will, of course,
differ per region. A correlation of 1 indicates a perfectly
positive correlation, while -1 indicates a perfectly
negative correlation (which move in completely
opposite directions).
Contrary to popular belief, global listed property
has been more correlated to global equities
than global bonds over the period under review.
Notwithstanding this observation, the fact that the
average correlation between REITs and equities is
significantly below 1 means that the addition of REITs
to a broader investment portfolio can provide valuable
diversification benefits.

Five years

Outlook: global property within a MAC portfolio
Diversification within a broader investment portfolio
is particularly pertinent during a time when market
participants believe that a correction in global equities
may be due. However, the diversification benefits of
adding REITs to an investment strategy can accrue
regardless of the absolute performance of equities
or the relative performance of listed property versus
various equities.

RESOURCES
Reitway Global Property

Global Equities

Global Listed Property

MAC (80/20, equities/listed property)

Performance

88, 2%

95, 2%

89, 6%

Standard deviation

26, 73

27, 32

26, 59

Sharpe ratio

3, 3%

3, 5%

3, 4%

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