2007-07-18

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Europe | REIT Property Statistics Commercial Property Trend

Study Proves: Open-End Funds and REITs Boost Portfolio Performance- CGG Commissions Analysis of 15K Anonymous Investor Portfolios

Europe: Investors who add shares of open-end property funds and REITs to their portfolios will realise a more attractive risk/return relation, and thus reach their investment goals sooner.

Open-end property funds suggest themselves as the investment of choice for security-minded investors, whereas REITs are more suitable for portfolios with low to medium risk profile. This is the result of an empirical study of real estate as an asset class in portfolio management that Commerz Grundbesitz commissioned the Institut für Vermögensaufbau in Munich to compile.

Specifically, the study tried to find out in what ways open-end property funds and REITs can contribute to the diversification of investor risks and enhance yield opportunities in professionally and privately structured portfolios. More than 15,000 actual reference portfolios of private investors with a combined volume of 1.9 billion euros were evaluated in conjunction with the analysis, covering the years from 1999 through 2007.

For the assessment of the professional portfolios, the institute researched an investment volume in the two-digit billion ranges. In order to gauge the effects that open-end property funds and REITs can have on the risk/return relations of the portfolios under consideration, a substitution process was used. In the course of this process, open-end property fund and REIT shares were substituted for the money-market and bond shares of the reference portfolios. In principle, the substituted investment forms most closely resemble diversified indirect real estate investments with access to a liquid secondary market when compared under risk/return aspects.

The study used cluster analyses to identify the most common deposit structures in the extensive universe. Next, the substitution process was applied, differentiating between conservative, balanced and aggressive portfolios on the basis of equity quotas of varying levels.

Available market indices were used to develop representative time series for either real estate investment type. The open-end property funds were mapped using an equally weighted basket of the five largest open-end property funds in Europe. In order to portray the REIT investment class as objectively as possible, a global and a US REIT index were used.


Open-End Property Funds Lower Portfolio Risks

The study found that integrating open-end property funds into any kind of professional portfolio will result in an improved risk/return relation. For instance, open-end property funds lowered the investment risk by a higher margin than did money market and bond shares, and did so in direct proportion to their share in the respective portfolio. It proved possible to lower the risk of the professional reference portfolios by up to around 20% by adding shares of open-end property funds. Open-end property funds had a similarly positive effect on private investor portfolios. Here, too, open-end property portfolios were almost always able to enhance the risk/return relation. While the addition of open-end property funds brought a substantial reduction of the investment risks, it actually also improved the yield expectations for aggressive deposits.

REITs Enhance Yield Opportunities

Integrating REITs in both professional and privately structured deposits invariably led to a substantial increase in returns (by a maximum of 1.3 percentage points). Although this approach involved a higher risk, it did improve the overall risk/return relation. Here, too, the positive effect intensified in proportion to the reference portfolio’s previous money market and bond share.


A Word on Commerz Grundbesitz:

Commerz Grundbesitz counts among the global leaders in real estate asset management, managing open-end property retail funds along with institutional property funds and REITs. The Group currently manages real estate worldwide with a volume of approximately 12 billion euros in 15 different countries. With foreign real estate assets of approximately 10 billion euros, and a gross lettable area of about 3 million m2, Commerz Grundbesitz Group is one of Europe’s largest real estate investment houses.

The Group includes Commerz Grundbesitz-Investment GmbH (CGI), a capital investment company founded in 1992, which manages the Group’s retail funds. These include the market leader hausInvest europa, with a fund volume of more than 8.6 billion euros Europe’s largest open-end property fund.
In March 2004, CGI started hausInvest global, an open-end fund with investments worldwide and a fund volume now worth more than 1.6 billion euros. By founding the French investment trust CeGeREAL in 2006, Commerz Grundbesitz Group became the first German real estate company to launch a REIT.

Contact:

Markus Esser
Press Spokesman

Commerz Grundbesitz Group
Kreuzberger Ring 56
D - 65205 Wiesbaden

tel: 0049 - 611 - 7105 - 485
fax: 0049 - 611 - 7105 - 289
email: markus.esser@cgg.de
internet: www.cgg.de

Markus Esser Commerz Grundbesitz Group - 2007-07-18

Announcement by Commerz Grundbesitz Group. The originator takes responsibility for its content.