MSCI warns of real estate investment challenges

real-estateMost asset owners have some misalignment in their real estate policy benchmarks giving them an inaccurate view of exposures, says MSCI, an index provider.

In research into alternative investments, MSCI explored how asset owners are strengthening risk management of their real estate exposure, as alternatives feature high on wish-lists of investments.

Although 70% of asset owners have real estate policy benchmarks, MSCI says 80% have “some benchmark misalignments” as asset owners often use domestic benchmarks even when investing in foreign markets.

“The findings reveal significant variations in the role of real estate in investor portfolios, creating the potential for inaccurate views of actual exposure,” said Peter Hobbs, managing director of research for MSCI-IPD.

“Asset owners are working hard to overcome these challenges by better integrating real estate with other asset classes and tightening up their risk management practices.”

MSCI says that 95% of respondents plan to maintain or increase their allocation to alternative investments.

MSCI used publicly available data of a 138 global asset owners and conducted a survey among 80 of them with total assets close to $4 trillion (€2.9 trillion) in the fourth quarter of last year.

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