Suggested vs. Actual Institutional Allocattion to Real Estate in Europe: A Matter of Size

Martin Hoesli and Jon Lekander ()

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: The allocation to real estate by institutional investors has increased in recent years and as a result the gap between suggested and actual allocations has narrowed. The increased inflow of capital to the real estate market is suggested to be a function of two factors: An increased focus on absolute return target investments amongst institutional investors and an increased target allocation to real estate. We argue that the increased target allocation is made possible mainly by the development of new investment vehicles, in particular of private real estate funds, but also of the growing integration of economic regions and of other factors such as the development of investment benchmarks. The flows needed for the actual allocation by European institutional investors to match the suggested allocation constitute at least 31% of the real estate equity universe held by owner occupiers. We estimate that seven years would be needed to reach the target allocation, but it is unlikely that sufficient investment opportunities will arise unless the willingness of owner occupiers to outsource their real estate assets increases.

Keywords: real estate allocation; market transparency; private real estate; flows (search for similar items in EconPapers)
JEL-codes: G23 R33 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-eec, nep-fin, nep-fmk and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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