ABSTRACT
The high correlation of real estate asset classes demonstrates that adding additional product types and/or assets to a real estate portfolio may not achieve the desired diversification intended by a portfolio manager. Rents are another defining factor which are different between asset classes. Generally there is a base rent which is paid monthly (daily for hotels) with annual and/or periodic step-ups to adjust for expense increases, inflation, etc. A method to compare return and risk for the four asset classes is the year-over-year performance from 2001 to 2013. The high correlation of real estate asset classes demonstrates that adding additional product types and/or assets to a real estate portfolio may not achieve the desired diversification intended by a portfolio manager. Single-family residential communities or planned unit development (PUD) communities are generally for sale property where land is subdivided into individual lots for building/construction.
