GREITs Landscape Review – Outlook for institutional allocation positive but caution warranted on active managers

Key Insights.

  • Superannuation asset allocation towards listed and unlisted real estate has steadily increased since 2013.
  • Retail funds have the highest exposure to GREITs, aging demographic profiles of several non- retail funds is expected to increase the demand for listed real estate over unlisted.
  • GREIT managers have experienced exponential growth since GFC, active managers dominate the top 10 lists by assets.
  • Unhedged GREIT strategies have benefited from weak Australian dollar, adding 3.3% and 1.8% p.a to investor returns over the past 12 and 36 months, respectively.
  • The average correlation of manager excess returns is low however rising cost of capital and geopolitical uncertainty is likely to drive correlation higher going forward.
  • The data-set on GREIT manager performance suggests that investors need to be cautious when selecting active managers in this asset class.
  • To realise positive, net of fee alpha, investors need to select highly active, skilled managers that can deliver first quartile alpha.

Check out complete report here.

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