The Role of Direct Property within Investment Funds (2012)

The majority of literature on direct property investment advocates that real estate should be used within portfolios primarily to provide diversification benefits, rather than provide returns. However, the risk reducing characteristics of real estate have come under some criticism by academics over the last decade. This study explores the role of property within investment funds in. It does so by using a combination of desk-based and primary research. The desk-based research consists of a review of the literature on property investment. The primary research consists of two components. The first is an online questionnaire that was sent out to investment fund managers. 48 responses were completed out of 201 sent out which constitutes a 24% return. Interviews were then carried out with a limited number of fund managers in order to supplement the results of the survey. The main finding of the research is that contrary to the existing literature, the role of property within investment funds is to provide a mixture of risk reduction and return. As well as this the study identifies that there is a gap between the way academics recommend property should be utilised within portfolios with how it is actually used in practice In order to effectively analyse the role direct property has within UK investment funds the dissertation aims to answer the following questions:

  • Why is the allocation of property within mixed-asset funds significantly lower than some academics recommend?
  • What are the main factors that fund managers use to explain the distribution of returns?
  • Is London a more attractive area for investment than the regions?
  • Is international diversification desirable for investors?
  • How do fund managers allocate assets within their portfolios?
  • 10,000 words – 50 pages in length
  • Excellent use of literature
  • Good in depth analysis
  • Good analysis of the subject area
  • Includes questionnaire
  • Ideal for building and quantity surveying students

1 Introduction
Aims and objectives
Research questions
Research methods
Relevance and importance of research
Outline of dissertation structure

2 Property’s role as a means of risk reduction in investment funds
Modern portfolio theory
The efficient frontier
Capital asset pricing model
Arbitrage pricing theory
Hedge against inflation
International investment

3 Property’s role as a means of providing returns in investment funds
Property’s position on the efficient frontier when used for return
Income return versus capital return
Region versus sector
Valuation smoothing
Summary 16

4 Research methods
Reasons for the use of an online questionnaire
Construction of the survey
Sending the survey
Limitations of the survey
Limitations of the interviews

5 Research analysis
The role of property within investment funds
The role of property as a means of risk reduction
The role of property as a means of providing returns

6 Conclusions, recommendations and limitations
Main findings
Scope for further research



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