Page 6 - ANJ Capital Market Presentation

Real Estate Portfolio Diversification

Highlights

Real estate returns show a low correlation with returns on equities or bonds

Property rentals and prices tend to adjust with inflation, offering a valuable inflation hedge
With suitable assets, a large real estate portfolio can offer a stable rental income stream

Summary
Real estate has long been seen as an attractive hunting ground for investment returns by institutional and
individual investors alike. When introduced into a multi-asset portfolio, real estate offers key diversification
and inflation hedging benefits, potentially enhancing the portfolio’s risk-adjusted returns.

With the right asset mix, a skillfully constructed real estate portfolio can also offer an income stream that
is relatively stable through market ups and downs.

While the evidence is strongest for private or unlisted real estate, there are practical benefits to adding
both private and listed real estate investments to a portfolio.

Real estate assets are typically priced on a local basis and the performance of individual properties is
heavily influenced by local supply and demand dynamics and regulations. Even within a single country,
local drivers of real estate returns are likely to vary across different locations and property types such as
office, retail, industrial and residential. This means that adding a large number of properties across
multiple locations and property types to a portfolio of equities and bonds can offer a double or triple
diversification benefit.

Stable income with the right asset mix
Income from rentals typically contributes to a large proportion of global real estate returns as shown in the
graph.

20
Source: MSCI IPD Global Annual Property Index.
15
10
5

-5
-10
-15
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

A skillfully constructed real estate portfolio comprising multiple high-quality properties with long-term
leases that expire at different times can offer a rental income stream that is relatively stable even though
short-term market moves up and down.

Retail

10.5%
Healthcare 8.0% 26.2%
Residential

Education 13.0%
Hospitality
20.2%
11.3%
Industrial 4.9% 8.9%
Infrastructure