Time variation in the allocation to real estate assets through the life cycle

Abstract

We investigate the performance of allocations to public and private real estate using dynamic retirement portfolio strategies. Our approach frames asset allocation decisions to real estate with the primary objective of maximizing retirement outcomes. The main innovation in this paper is that allocations to listed and unlisted real estate are formally incorporated into a dynamic framework that can be implemented by defined contribution (DC) retirement plans. We demonstrate that the time-variant characteristics of real estate as an asset class can be systematically exploited to improve the risk-return trade-offs in retirement portfolios through the lifecycle of a DC plan member.