Real estate, which combines elements of stocks, bonds, and hard assets, is widely recognized as an institutional-class investment with distinct risk and return factors. As a result, real estate can help diversify an institutional portfolio. This paper provides an overview of core real estate, reviews the case for including it in a portfolio, and discusses its characteristics.
Real estate has the potential to provide the steady income of bonds, the appreciation of stocks, and the inflation-protection of hard assets. Arguably for these reasons, the target allocation to real estate among institutional portfolios has steadily risen since the 1980s.