Some 80% of global institutional investors have a degree of misalignment between their real estate benchmarks and their portfolios, with a third of that group having a significant misalignment such as using a domestic benchmark for a portfolio with exposure to foreign real estate, according to a survey released Tuesday by MSCI.
Thirty-four percent of investors have more than a 25% misalignment between their real estate benchmarks and portfolios, while the portfolios of 46% of investors are misaligned by 5% to 25%; 20% are perfectly aligned.
“I think the issue of alignment is a key theme,” said Peter Hobbs, managing director and head of research at Investment Property Databank, a subsidiary of MSCI.
Another example of a misalignment is when the institutional investor's risk officer expects real estate to provide a fixed income-type hedge against inflation, but the real estate portfolio is taking on equity risk, Mr. Hobbs said in an interview.
U.S. investors' portfolios had the most misalignment. Some 40% of U.S. investors had portfolios that were 25% or more misaligned. Another 50% of U.S. investors have 5% to 25% misalignment.
The survey of 80 asset owners worldwide was conducted in the fourth quarter.