Building And Maintaining An Optimal Real Estate Portfolio

This paper is written from a property fund management perspective. Our research platform is fundamental to investment decision making throughout CBRE Investors. Most specifically, the need to anticipate and translate future market conditions into investment strategy is a critical factor in delivering out-performance whilst minimising risk. At the heart of our research lie forecasts of property market performance. Over the past decade, property has become a more mature asset class, subject to greater use of leverage and more international capital flows. Accordingly, in future, we would expect to see shorter and higher amplitude return cycles. Therefore, we need to make sure that we have policies and mechanisms in place that will protect us from failing to meet our targets and insure that we can deliver the best return in relation to the risk undertaken. This study investigates what mechanisms should property fund manager set in practices to manage risk in a real estate portfolio. The question that we are trying to answer is: ìHow can real estate fund manager insure that the real estate portfolio will produce optimal returns?î. Our prime aim is to create a forward-looking model for direct property portfolios which will help a fund manager to build and monitor an optimal real estate allocation by applying the theory of efficient frontiers.