The blended approach to real estate allocations: performance implications of combining an exposure to German Spezialfonds with Global Listed Real Estate Securities

This paper seeks to increase the understanding of the performance implications for investors who choose to combine an unlisted real estate portfolio (in this case German Spezialfonds) with a (global) listed real estate element. We call this a “blended” approach to real estate allocations. For the avoidance of doubt, in this paper we are dealing purely with real estate equity (listed and unlisted) allocations, and do not incorporate real estate debt (listed or unlisted) or direct property into the process. A previous paper (Moss and Farrelly 2014) showed the benefits of the blended approach as it applied to UK Defined Contribution Pension Schemes. The catalyst for this paper has been the recent attention focused on German pension fund allocations, which have a relatively low (real estate) equity content, and a high bond content. We have used the MSCI Spezialfonds Index as a proxy for domestic German institutional real estate allocations, and the EPRA Global Developed Index as a proxy for a global listed real estate allocation. We also examine whether a rules based trading strategy, in this case Trend Following, can improve the risk adjusted returns above those of a simple buy and hold strategy for our sample period 2004-2015. Our findings are that by blending a 30% global listed portfolio with a 70% allocation (as opposed to a typical 100% weighting) to Spezialfonds, the real estate allocation returns increase from 2.88% p.a. to 5.42% pa. Volatility increases, but only to 6.53%., but there is a noticeable impact on maximum drawdown which increases to 19.4%. By using a Trend Following strategy raw returns are improved from 2.88% to 6.94% p.a. , The Sharpe Ratio increases from 1.05 to 1.49 and the Maximum Drawdown ratio is now only 1.83% compared to 19.4% using a buy and hold strategy . Finally, adding this (9%) real estate allocation to a mixed asset portfolio allocation typical for German pension funds there is an improvement in both the raw return (from 7.66% to 8.28%) and the Sharpe Ratio (from 0.91 to 0.98).

Access, equity and the role of rights in health care

Modern health care rhetoric promotes choice and individual patient rights as dominant values. Yet we also accept that in any regime constrained by finite resources, difficult choices between patients are inevitable. How can we balance rights to liberty, on the one hand, with equity in the allocation of scarce resources on the other? For example, the duty of health authorities to allocate resources is a duty owed to the community as a whole, rather than to specific individuals. Macro-duties of this nature are founded on the notion of equity and fairness amongst individuals rather than personal liberty. They presume that if hard choices have to be made, they will be resolved according to fair and consistent principles which treat equal cases equally, and unequal cases unequally. In this paper, we argue for greater clarity and candour in the health care rights debate. With this in mind, we discuss (1) private and public rights, (2) negative and positive rights, (3) procedural and substantive rights, (4) sustainable health care rights and (5) the New Zealand booking system for prioritising access to elective services. This system aims to consider: individual need and ability to benefit alongside the resources made available to elective health services in an attempt to give the principles of equity practical effect. We describe a continuum on which the merits of those, sometimes competing, values-liberty and equity-can be evaluated and assessed.

The competitive dialogue procedure: Advantages, disadvantages, and its implementation into English and Dutch law

Competitive Dialogue (CD) is a new contract award procedure of the European Community (EC). It is set out in Article 29 of the 'Public Sector Directive' 2004/18/EC. Over the last decades, projects were becoming more and more complex, and the existing EC procedures were no longer suitable to procure those projects. The call for a new procedure resulted in CD. This paper describes how the Directive has been implemented into the laws of two member states: the UK and the Netherlands. In order to implement the Directive, both lawmakers have set up a new and distinct piece of legislation. In each case, large parts of the Directive’s content have been repeated ‘word for word’; only minor parts have been reworded and/or restructured. In the next part of the paper, the CD procedure is examined in different respects. First, an overview is given on the different EC contract award procedures (open, restricted, negotiated, CD) and awarding methods (lowest price and Most Economically Advantageous Tender, MEAT). Second, the applicability of CD is described: Among other limitations, CD can only be applied to public contracts for works, supplies, and services, and this scope of application is further restricted by the exclusion of certain contract types. One such exclusion concerns services concessions. This means that PPP contracts which are set up as services concessions cannot be awarded by CD. The last two parts of the paper pertain to the main features of the CD procedure – from ‘contract notice’ to ‘contract award’ – and the advantages and disadvantages of the procedure. One advantage is that the dialogue allows the complexity of the project to be disentangled and clarified. Other advantages are the stimulation of innovation and creativity. These advantages are set against the procedure’s disadvantages, which include high transaction costs and a perceived hindrance of innovation (due to an ambiguity between transparency and fair competition). It is concluded that all advantages and disadvantages are related to one of three elements: communication, competition, and/or structure of the procedure. Further research is needed to find out how these elements are related.

Diversification when it hurts? The joint distributions of real estate and equity markets

Much of the literature on the construction of mixed asset portfolios and the case for property as a risk diversifier rests on correlations measured over the whole of a given time series. Recent developments in finance, however, focuses on dependence in the tails of the distribution. Does property offer diversification from equity markets when it is most needed - when equity returns are poor. The paper uses an empirical copula approach to test tail dependence between property and equity for the UK and for a global portfolio. Results show strong tail dependence: in the UK, the dependence in the lower tail is stronger than in the upper tail, casting doubt on the defensive properties of real estate stocks.