Global real estate securities funds have grown to $286 billion in assets under management. There is a wide variety of fund strategies including benchmarked, non-benchmarked, income, long/short, and ETFs. Fund performance has been strong, especially on a risk-adjusted basis, though maximum drawdowns can be reduced using momentum, risk parity, and trend following strategies. Listed real estate provides liquidity and is used as a proxy for direct real estate investment, especially in defined contribution plans. Current trends include a focus on income strategies, long/short funds, and multi-factor optimization models.

1. GLOBAL REAL ESTATE SECURITIES FUNDS
AN EMERGING ASSET CLASS ?
ERES Conference
Vienna July 2013
Alex Moss, Consilia Capital
alex.moss@consiliacapital.com

2. CONTENTS
2
• Purpose of the study
• The real estate securities funds universe
• Performance
• Listed global real estate : strategies, applications, roles
• Current trends and Conclusions
Consilia Capital 2013 www.consiliacapital.com

3. PURPOSE OF THE STUDY
3
•
Historically the sector has been relatively straightforward: actively managed,
benchmarked vehicles, providing exposure to the global listed real estate sector.
•
More recently there have been a number of developments, in particular:
•
•
•
•
•
•
•
Cost pressures: Increased use of lower cost, passive vehicles (ETFs)
Funds flow: Large inflows into Global REIT strategies from Japanese investors
Liquidity bias: Emphasis on “liquid” strategies
Search for Income: Investor demand for income oriented funds
Non market cap index strategies: Interest in alternative index strategies (“smart beta”)
Diverse Product use: Use of Global REIT trackers for the increasingly important Defined Contribution
market
Competition: Competing for same capital pool as Infrastructure Funds
•
The purpose of this study is to examine the development, current structure and
performance of the sector to ascertain how it will respond to these developments.
• Two main sources have been used :EPRA Report – Use of listed real estate securities in
asset management, and Consilia Capital Monthly Funds Monitor Reports
Consilia Capital 2013 www.consiliacapital.com

4. DEVELOPMENT POST GFC
4
•
The US has been the clear beneficiary of positive funds flow to the listed sector post
GFC, followed by Global mandates.
Change in RE Securities Funds 2007-2012
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
-10
0
Europe
Asian
Global
-20
Global REIT
US
-10
-20
Source: Consilia Capital January 2013
Consilia Capital 2013 www.consiliacapital.com
AuM change US$bn (L H
Scale)
change in no of funds (RH
Scale)

5. REAL ESTATE SECURITIES FUNDS UNIVERSE
5
•
•
•
•
In the Consilia database we monitor just under 750 funds with combined AuM of
US$286bn. This compares to a global listed sector valued at US1,155bn (source:
EPRA May 2013). i.e. specialist funds represent c. 25% of the listed sector .
The true figure for dedicated funds is higher than this , due to separate account
mandates.
Global funds represent c. 22% of the total AuM, and Global REIT Funds around 12%.
ETFs represent c.19% , but is the fastest growing sector. ( ETFs linked to EPRA Global
Index +85% to US$8.7bn in 12 months to Feb. 2013)
Fund Mandate
Asian
European
Global Infrastructure
Global Real Estate
Global REIT
Japan
US
Total
ETF
No.
10
10
6
11
3
7
29
76
AuM($m)
892
2,603
1,148
8,828
2,044
1,123
37,059
53,697
Active Funds
Total
No.
AuM($m) No. AuM($m)
55
3,459
65
4,352
77
11,294
87
13,897
61
13,308
67
14,456
238
54,800
249
63,628
74
32,379
77
34,423
44
12,404
51
13,528
121
105,504
150
142,562
670
233,148
746
286,845
Source: Consilia Capital, May 2013
Consilia Capital 2013 www.consiliacapital.com

6. LISTED GLOBAL REAL ESTATE FUND STRATEGIES
6
Universe of
Listed Real
Estate Securities
Long/short strategies
Long Only Strategies
Benchmark
Non benchmark
Income Funds
Hedge Fund
130/30 style
Indexed/ETF
Source: EPRA report “Use of listed real estate in asset management “ by Alex Moss and
Andrew Baum
Consilia Capital 2013 www.consiliacapital.com

7. RISK ADJUSTED PERFORMANCE
7
•
Excellent 2012 (and longer term) risk adjusted performance
• Greatest fund choice and liquidity
300
Global RE
250
200
US RE
No. of Funds 150
Asian RE
European RE
100
Global Infrastructure
50
Source: Consilia Capital,
Bloomberg
0
0.00
Global REIT
Real Assets
0.50
1.00
1.50
Sharpe Ratio
2.00
2.50
Source: Consilia Capital, January 2013
Consilia Capital 2013 www.consiliacapital.com
3.00

8. PERFORMANCE THROUGH THE CYCLE
8
• Second strongest recovery from the trough ( March 2009)
• Remains below peak (Feb 2007) levels
30
Infrastructure
20
10
Average % change
from Peak
Asia
Japan
Real Assets
US
0
0
-10
50
100
150
200
Global
REITs
250
300
350
Global
-20
Europe
-30
-40
Average % change from Trough
Source: Consilia Capital, May 2013
Consilia Capital 2013 www.consiliacapital.com

9. DISPERSION OF FUND PERFORMANCE
9
• Variety of strategies leads to wide dispersion of performance
• Chart below shows 5 year returns rebased in US $ with returns on
horizontal
6000
5000
4000
3000
2000
1000
0
-60
-40
-20
0
20
40
60
Source: Consilia Capital, May 2013
Consilia Capital 2013 www.consiliacapital.com

10. PERFORMANCE RELATIVE TO OTHER ASSET CLASSES
10
1993-2011
• Superior returns ( raw and risk adjusted)
• Maximum drawdown, however, is inferior.
• Studies show that with mechanical trading rules based on momentum, risk parity, and
trend following portfolio maximum drawdown can be reduced dramatically
Measure
Average returns pa %
Sharpe ratio
Maximum drawdown %
Strategy
Buy and Hold Momentum
6.71
10.90
0.28
0.54
46.60
45.12
Risk Parity
6.78
0.60
20.46
Trend Following
9.11
0.86
6.86
Source: Professor Andrew Clare , Cass Business School
Consilia Capital 2013 www.consiliacapital.com
Combined
15.65
1.01
18.34

11. LISTED GLOBAL REAL ESTATE : USE AND APPLICATIONS
11
Direct proxy
Liquidity
DC real estate
funds
PAIF/APUT
Filling gaps
Focus
Platform investing
Source: EPRA report “Use of listed real estate in asset management “ by Alex Moss
and Andrew Baum
Consilia Capital 2013 www.consiliacapital.com

12. COMBINING WITH OTHER ASSET CLASSES
12
B + Direct real
estate
C + External
unlisted real
estate funds
G + Derivatives
A Listed real
estate
F + other real
assets, ie
commodities,
infrastructure
D + Single
internal real
estate fund
E + Real estate
debt
Source: EPRA report “Use of listed real estate in asset management “ by Alex Moss
and Andrew Baum
Consilia Capital 2013 www.consiliacapital.com

13. CURRENT TRENDS AND SUMMARY
13
• The European listed Universe remains too small (c.12% of the Global Index) to
warrant new Fund launches, with Global the most popular mandate for new Funds.
• New global funds being launched require a greater strategy than purely sector
exposure to gain credible AuM.
• Existing Funds with insufficient critical mass are being wound down/integrated
• Fund strategies either recently launched or in the process of being launched have
focussed on :
• Income
• Long/short, 130/30 style
• Multi factor optimisation models
• Liquidity provision for DC schemes
Consilia Capital 2013 www.consiliacapital.com

14. CURRENT TRENDS AND SUMMARY
14
•
There has been increased interest in using Global listed real estate securities funds in
multi asset portfolios with ;
• All other asset classes
• Purely real estate assets
• Other “real assets” , infrastructure, commodities
•
Possible future Fund styles would include:
• Sector specialisation – Global Office, Global Logistics etc.
• Real estate specific “Smart Beta “ funds, particularly Fundamentally Weighted
selection with a liquidity weighting
•
The greatest current challenge are :
1) The competition for capital from infrastructure funds
2) Downward pressure on fees, hence the increased interest in passive strategies
Consilia Capital 2013 www.consiliacapital.com