Historically, the majority of global real estate returns have come from income, which has made up more than 80% of the total return over the past decade. In 2014, however, growth in asset values represented 43% of the total return — more than double its long-term average contribution.

Income is the principal foundation of real estate investment returns. For most markets and over the longer term, the vast majority of the real estate return comes through income rather than appreciation. The income generating nature of real estate has become even more relevant in an era of ultra-low interest rates, and in the context of the search for yield. Given the importance of income to investors, increasing attention is being placed on the monitoring of real estate cashflows in order to...

Growth Drives Long-run Risk and Return Peter Shepard, Peter Hobbs, Yang Liu June 2015 Many institutional investors have been favoring private real estate over bonds, drawn by  its steady income stream and higher yields. But while the short-term income of real estate may be bond-like, our research shows that its long-run behavior is much more cyclical and growth-sensitive. Real estate is not the high-return, low-risk, free lunch some investors would hope for. But it’s not all bad news:...

As the MSCI Global Quarterly Infrastructure Asset Index grows in breadth and depth it provides increasing insights into the performance of the Infrastructure Asset Class, globally.  In this Research paper, we focus on two broad areas related to sector-specific nuances of the asset class. First, the differential performance and volatility of the Transport and Power sectors, the two dominant streams of activity in the index.  Second, a comparison of unlisted and listed infrastructure,...

As an asset class, real estate typically has a high degree of home bias, especially when compared to equities and fixed income. However, this home bias is starting to erode, with asset owners in most countries already investing internationally or actively exploring options for building off-shore exposures.

Global property has delivered another stellar year of performance of 9.9%, the fifth consecutive year of strong returns since the financial crisis, and the best performance since 2007. A series of countries performed particularly well over the past year, most notably Ireland with a record return of 40%, but also the U.K. (17.9%) and U.S. (11.5%).

The classic 60:40 mix of stocks and bonds has shifted to a 40:40:20 mix of stocks, bonds and alternatives, according to the 2014 MSCI Asset Owner survey.

The home bias of real estate investing is starting to change. The world’s largest Sovereign Wealth and Pension Funds are leading the change with explicit global real estate investment mandates seeking to exploit the richer global opportunity set and its diversification benefits. In this Research Insight, we use the Barra Private Real Estate Model (PRE2) to examine the drivers of risk and return in the international real estate markets, and find that fragmentation of the global markets has led...

This Research Insight presents the results of the 2013 MSCI Global Asset Owner Survey, which focuses on understanding the asset allocation processes of institutional asset owners, with a close examination of risk management of the real estate exposure. The findings come from in-person interviews with staff at 40 asset owners from around the world, representing $3.2 trillion in assets, as well as online survey responses from another 40 asset owners, representing $0.7 trillion in assets. These...