chapter  12
5 Pages

Institutional Property Portfolios

Property, like other assets, will be managed with an increasing emphasis upon the relative performance and future potential of existing holdings, and by a more critical assessment of the short and medium term potential of properties under consideration for addition to portfolios. Fund managers, particularly those with very large portfolios, are aware that to achieve above average performance is likely to become increasingly difficult. Pension funds, in particular, will find cash flows more variable, and the "weight" of money going into property

will no longer have the effect that it had in the past. It can be expected therefore, that institutions will have a much more lower proportion in property than in the past, with probably 10% of total assets being accounted for by property holdings, compared with the historical 20%. It is also to be expected that institutional investors will treat property much more as a trading asset, being prepared to sell more frequently and perhaps to take a higher risk profile to achieve an acceptable level of performance. This higher risk profile is conducive to the much lower proportion of property in future portfolios. Indeed, increasingly property portfolios will have a much greater emphasis on development situations and be moving into new and untried areas.