ABSTRACT
This chapter describes much of the more theoretical material of property investment to the practical construction and management of a property portfolio. Passive management is consistent with the Efficient Markets Hypothesis, while active management relies on mispricing in investment markets. Passive portfolio management involves setting up a portfolio with particular characteristics, such as matching an index and trading only to maintain these characteristics. Fund managers gain more money to manage and investing institutions gain insurance or pension business if their performance is better than that of their competitors. Accordingly, the return objective is now usually expressed relative to the benchmark. There are two variants, one relative to the mean fund performance and the other relative to the median. Benchmarks are available in the UK and in other countries from the Investment Property Databank. The IPD is by far the largest property index in the UK and comprises the majority of the institutional property investment market.
