RT Journal Article SR Electronic T1 Real Estate in Mixed-Asset Portfolios for Various Investment Horizons JF The Journal of Portfolio Management FD Institutional Investor Journals SP 141 OP 158 DO 10.3905/jpm.2019.45.7.141 VO 45 IS 7 A1 Jean-Christophe Delfim A1 Martin Hoesli YR 2019 UL https://pm-research.com/content/45/7/141.abstract AB In this article, the authors investigate the role of real estate in a mixed-asset portfolio for various investment horizons and notably extend the literature by considering together direct real estate, real estate investment trusts (REITs), and nonlisted real estate funds, as well as other alternative investments. Using US data spanning almost three decades, they report that medium- to long-term investors should allocate 10% to 20% of their portfolio to direct real estate. In contrast, short-term investors should focus on open-end core funds, which are found to be good substitutes for direct investments. REITs are usually of limited interest as a substitute for direct real estate, but they could be used in conjunction with direct investments for medium- and long-term horizons. Value-added and opportunistic closed-end funds are found to be imperfect substitutes for direct investments and are only marginally used. Finally, the authors find that including commodities, private equity, and hedge funds in a portfolio enhances the portfolio’s performance but the allocation to real estate barely changes.TOPICS: Statistical methods, real estate, risk managementKey Findings• Allocation to direct real estate is null until a 2.5-year investment horizon, due to high transaction costs, but increases rapidly up to 20% for a 25-year investment horizon.• Core nonlisted funds are excellent substitutes for direct real estate investments, which is very useful for short investment horizons.• Including other alternative asset classes in the portfolio is useful, but this does not reduce the allocation to real estate.