For many years, investor motivations for considering real estate have included its characteristic stable income, strong historical relative performance across multiple cycles, and potential diversification benefits when held with other asset classes in a portfolio. Historically more domestically focused, institutional investors around the globe are now increasingly investing into non-domestic or even global real estate. Large Canadian institutional investors have been at the forefront of this trend. Reasons include a lack of domestic real estate investment opportunity, potential diversification benefits and risk reduction as well as return enhancement.
Private equity real estate includes direct investment in buildings (either wholly owned or in joint venture) and indirectly through unlisted commingled funds (or fund-offunds). Public equity real estate includes real estate investment trusts (REITs), other listed real estate companies and listed real estate funds. In this paper our focus is largely on unlisted private equity real estate. It is noteworthy that listed and unlisted real estate tend to have similar characteristics in the long-term but different characteristics in the short-term:
1. Listed – with daily liquidity comes with greater volatility
2. Unlisted – with periodic liquidity comes with greater stability (under normal market conditions)
Source : Invesco Real Estate