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Real Estate Investment in an Asset/liability Framework

Author

Listed:
  • Philip Booth

Abstract

The last ten years has seen an explosion of literature looking at the role of real estate in a multi-asset portfolio. There has been a more limited development of literature in the UK and US which considers how real estate fits into an asset/liability pension plan framework. This paper considers further aspects of that problem. In particular, the range of available asset classes is extended to include UK equities, US equities, cash, UK government conventional bonds, UK government index-linked bonds and UK real estate. Results which suggest that a high real estate proportion is appropriate in a pension fund, because of the relationship of its returns with pension plan liabilities may not be valid when a greater number of asset classes with similar characteristics are considered. Secondly, our pension fund model decomposes pension plan liabilities into mature (retired) and immature (active) liabilities. These types of liabilities have quite different characteristics. We are therefore able to investigate whether the maturing of pension plan liabilities should have any impact on real-estate investment decisions.

Suggested Citation

  • Philip Booth, 2001. "Real Estate Investment in an Asset/liability Framework," ERES eres2001_121, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2001_121
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    References listed on IDEAS

    as
    1. Gregory H. Chun & Brian A. Ciochetti & James D. Shilling, 2000. "Pension-Plan Real Estate Investment in an Asset-Liability Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(3), pages 467-491.
    2. Vihang Errunza & Ked Hogan & Mao‐Wei Hung, 1999. "Can the Gains from International Diversification Be Achieved without Trading Abroad?," Journal of Finance, American Finance Association, vol. 54(6), pages 2075-2107, December.
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    Cited by:

    1. Heinrich, Michael & Just, Tobias & Schreck, Thomas, . "Auswirkungen von Solvency II auf die Immobilienanlagen europäischer Versicherer," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 12, August.
    2. Just, Tobias & Möbert, Jochen & Heinrich, Michael, . "Deutsche Wohnimmobilien als Kapitalanlage : Gutachten im Auftrag der Deutsche Bank Privat- und Geschäftskunden AG," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 6, August.
    3. Dirk Brounen & Melissa Porras Prado & Marno Verbeek, 2010. "Real Estate in an ALM Framework: The Case of Fair Value Accounting," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 775-804, Winter.
    4. Michael Heinrich & Thomas Schreck, 2017. "Effects of Solvency II on Portfolio Efficiency, The Case of Real Estate and Infrastructure Investments," LARES lares_2017_paper_8, Latin American Real Estate Society (LARES).

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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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