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The Significance of Property Sector and Geographic Diversification in Australian Institutional Property Portfolios

Author/s: Graeme Newell, Tan Yen Keng

Date Published: 1/01/2003

Published in: Volume 9 - 2003 Issue 3 (pages 248 - 264)

Abstract

In a property portfolio, the standard strategies for portfolio diversification and risk reduction are diversification by property type and geographic region, with such property investment strategies typically employed by the major institutional investors. Using the Property Council of Australia (PCA) property indices over 1995-2002, the effectiveness of these property portfolio diversification strategies is assessed for Australian institutional property portfolios. Both property type and geographic diversification are seen to deliver significant diversification benefits, with these geographic diversification benefits confirming the successful sectorspecific strategy adopted by many listed property trusts in recent years.

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Keywords

Correlations - Geographic Diversification - Pca Property Index - Property Sector Diversification - Pure Property Returns - Sector-Specific Lpts - Tracking Error

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