The Role of REITs and Listed Real Estate Equities in Target Date Fund Asset Allocations

This analysis evaluates the role of commercial real estate equity investment through listed REITs and real estate securities in the glide path asset allocations of target date funds. Using both mean variance optimization and surplus optimization, the nearly 40-year historical record of investment performance demonstrates that optimal allocations range from five percent to eight percent for investment horizons of five to 10 years and as much as 18 percent for investment horizons of up to 40 years.

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