Do Asian real estate companies
add value to investment portfolio?
Kim Hiang Liow
Department of Real Estate, National University of Singapore, Singapore, and
School of the Built Environment, University of Ulster, Jordanstown, UK
– The purpose of this paper is to examine the role of Asian real estate companies with
regard to their “value-added” performance and portfolio diversiFcation beneFts in Asian mixed-asset
portfolios, as well as in international real estate securities portfolios over 1996-2005.
– ±irst the risk-return performance for all 13 Asian as well as the
US and UK real estate securities markets is compared. ±or each country, next the correlation proFles
between real estate, common stock, bonds and cash are assessed. The value-add beneFts of Asian real
estate securities in an unconstrained and constrained mixed asset portfolio are then assessed in
relation to portfolio return, risk and terminal wealth. ±inally, the paper explores whether there are
beneFts derived from international diversiFcation with a universe of Asian real estate securities from
the perspectives of the US and UK investors.
– It was found that, whilst there is little evidence of diversiFcation beneFts and superior
risk-adjusted performance of Asian real estate companies in Asian mixed-asset portfolios, diversiFcation
into Asian real estate stocks can provide positive portfolio implications for international investors. Thus
investing in Asian real estate securities portfolios rather than investing in Asian mixed-asset portfolios
may be seen to be the more effective diversiFcation strategy over this period.
– The study has provided some interesting and important insights into the
dynamics and performance of Asian real estate securities. With an increased emphasis on
international property investment and as the regional upturn becomes more evident, Asian real estate
companies potentially provide an important real estate investment opportunity for international
property fund mangers.
Real estate, DiversiFcation, Asset management, ±inancial analysis
With increased signiFcance of Asian real estate companies as real estate investment
vehicles for institutional investors to obtain property exposures in Asia (Table I), this
research assesses whether the risk-adjusted performance of Asian real estate
companies results in added value to Asian mixed investment portfolios, as well as in
the USA and UK real estate securities portfolios.
Given the signiFcant market share and the highest levels of securitization in
Asia-PaciFc markets including Australia, Japan, Hong Kong/China and Singapore, this
research on Asian property companies has signiFcant implications for ongoing
international real estate investment strategies, particularly for the USA/UK and Asian
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