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Building value through diversification 

Diversify investment strategies

A good way, amongst others, to achieve predictable and solid returns is optimal diversification, “You can diversify investments in terms of regions, sectors and risks, and listed real estate is a way to diversify in terms of investment strategies”, says Friso Berghuis, Manager Global Listed Real Estate. That’s why Bouwinvest decided to add listed real estate to its portfolio a few years back. It adds a whole new level of diversification, for one because it enables you to invest in market-sector combinations which might simply not be available via unlisted funds.” “On top of this, listed real estate adds liquidity to the portfolio, which in turn makes it easier to adjust to market developments or market outlooks”, says Leender Massier, Portfolio Analyst Listed. 

Optimal strategic portfolio

“In the longer term listed real estate companies behave very much in line with the underlying real estate. However, due to the continuous pricing of listed real estate companies, changes in market expectations are quickly reflected in company valuations. Therewith, price movements in listed real estate tend to be six to nine months ahead of the unlisted real estate market. Although this is by no means a sure thing, it can offer additional insight in where direct real estate values might go in the near term. Furthermore, listed real estate share prices are also influenced by overall stock market sentiment. As a result, stock prices might substantially deviate from its underlying real estate values from time to time, potentially offering attractive market entry and exit points,” Leender says.

What this boils down to, Friso says, is that diversification really does work, especially when combined with a clear road map. “It can be the best way to achieve the optimum strategic portfolio with bottom line solid returns. And armed with the insights of both listed and unlisted real estate markets, we can make the right acquisitions and disposals, at the right time, and add value to the portfolio on a continuous basis.”

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