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Determining the Current Optimal Allocation to Property: A Survey of Australian Fund Managers

Author/s: Wejendra Reddy

Date Published: 1/01/2012

Published in: Volume 18 - 2012 Issue 4 (pages 371 - 387)

Abstract

This research paper examines the property asset allocation strategies for the A$1.7 trillion Australian managed funds industry and identifies the important steps and considerations that influence their optimal property allocation view and decision making process. It investigates the use and relevance of strategic and tactical asset allocation strategies for property asset allocation decisions. The results indicate that the allocation of resources to property assets is a complex system of interdependent decisions given its distinctive investment characteristics when compared to alternative asset classes. Apart from definitive/quantitative inputs in property asset allocation models, Australian fund managers are influenced by many other non-financial considerations. In addition, there are notable differences in techniques for direct property, unlisted property and securitised property asset allocation. The results also demonstrate that there has been a shift in Australian fund manager’s property asset allocation views and strategies driven mainly by the fund’s need to adapt to the continued uncertain global financial market conditions.

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Keywords

Asset Allocation Strategies - Diversification - Fund Management - Portfolio Construction and Management - Property Investment

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