Aiming to Enhance Returns, Reduce Risk with a REIT Completion Strategy

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Case Study Overview

A large Australian superannuation fund had significant property type and geographic gaps in their Commercial Real Estate holdings and wanted to quickly access these property types to enhance returns and reduce risk.

 

Key Partners

  • Australian superannuation fund
  • PGIM Real Estate GRES Portfolio Management Team
  • IRG Business Development

 

Challenge

How to get quick access to secularly growing non-core property types that enhance portfolio returns as well as complement and diversify the fund's current real estate holdings.

 

Approach

PGIM Real Estate worked closely with the client to understand their needs:

  • We educated the client on the merits of active versus passive investment management in the listed real estate space.
  • We reviewed their existing private real estate allocation and recommended listed property types that could help diversify and enhance their real estate portfolio returns.

Solution

We proposed a REIT completion strategy, which meets the client goals of quickly accessing higher-growth property types while enhancing portfolio returns and providing more liquidity and diversification in their real estate portfolio.

While the initial mandate centered on diversifying the client's private real estate exposure, we presented a full solution encompassing both their private real estate allocation and their passive listed real estate allocation. To implement this strategy:

  • We explored the benefits of active management with the client. This resulted in the client shifting its passive listed real estate allocation to our Select Real Estate Strategy.
  • We developed target investment allocations and ranges for each recommended listed property type to optimize the listed portfolio's return and risk metrics.
  • We developed governance, performance and oversight metrics as well as custom reporting aiming to meet the client's transparency, governance and measurement needs.

 

Case studies are provided for illustrative purposes only and results may vary.