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Portfolio Construction and Risk in Management Property Securities Funds

Author/s: Graeme Newell, Peter Acheampong

Date Published: 1/01/2001

Published in: Volume 7 - 2001 Issue 4 (pages 285 - 295)

Abstract

The key issue of the number of property trusts to be included in property securities fund portfolios is considered. Using portfolio risk simulations over 1994-2000, it is shown that property securities funds are including more property trusts than are required to achieve optimum portfolio risk, largely due to other risk management criteria that need to be included in effective investment decision-making for property securities funds. This is found to include a range of portfolio construction constraints, such as tracking error, compliance and limiting exposure to individual property trusts. Once these additional criteria are factored in, property securities funds are still including sufficient property trusts for optimum portfolio construction.

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Keywords

Diversification - Investment Strategy - Property Securities Funds - Property Trusts - Risk Management - Tracking Error

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