Aligning asset allocation and real estate investment: some lessons from the last cycle

Asset allocation is concerned with the development of multi--‐asset portfolio strategies that are likely to meet an investor’s objectives based on the interaction of expected returns, risk, correlation and implementation from a range of distinct asset classes or beta sources. Challenges associated with the discipline are often particularly significant in private markets. Specifically, composition differences between the ‘index’ or ‘benchmark’ universe and the investible universe mean that there can often be substantial and meaningful deviations between the investment characteristics implied in asset allocation decisions and those delivered by investment teams. For example, while allocation decisions are often based on relatively low--‐risk diversified real estate ‘equity’ exposure, implementation decisions frequently include exposure to higher risk forms of the asset class as well as investments in debt based instruments. These differences can have a meaningful impact on the contribution of the asset class to the overall portfolio and, therefore, lead to a potential misalignment between asset allocation decisions and implementation. Despite this, the key conclusion from this paper is not that real estate investors should become slaves to a narrowly defined mandate based on IPD / NCREIF or other forms of benchmark replication. The discussion suggests that such an approach would likely lead to the underutilization of real estate in multi--‐asset portfolio strategies. Instead, it is that to achieve asset allocation alignment, real estate exposure should be divided into multiple pools representing distinct forms of the asset class. In addition, the paper suggests that associated investment guidelines and processes should be collaborative and reflect the portfolio wide asset allocation objectives of each pool. Further, where appropriate they should specifically target potential for ‘additional’ beta or, more marginally, ‘alpha’.

Sources of alpha and beta in property funds

This paper examines issues related to potential analytical performance systems for global property funds. These will include traditional attribution methods but will also cover the performance concepts of alpha and beta widely used in other asset classes. We look at issues including...what creates beta, and what drives alpha in real estate investment? How can it be measured and isolated? How do these concepts relate to traditional attribution systems? Can performance records and performance fees adequately distinguish between these drivers? In this paper we illustrate these issues by reference to a case study addressing the complete performance record of a single unlisted fund.

Long-chain n−3 PUFA: plant v. marine sources

Increasing recognition of the importance of the long-chain n-3 PUFA, EPA and DHA, to cardiovascular health, and in the case of DHA to normal neurological development in the fetus and the newborn, has focused greater attention on the dietary supply of these fatty acids. The reason for low intakes of EPA and DHA in most developed countries (0 center dot 1-0 center dot 5hairspg/d) is the low consumption of oily fish, the richest dietary source of these fatty acids. An important question is whether dietary intake of the precursor n-3 fatty acid, alpha-linolenic acid (alpha LNA), can provide sufficient amounts of tissue EPA and DHA by conversion through the n-3 PUFA elongation-desaturation pathway. alpha LNA is present in marked amounts in plant sources, including green leafy vegetables and commonly-consumed oils such as rape-seed and soyabean oils, so that increased intake of this fatty acid would be easier to achieve than via increased fish consumption. However, alpha LNA-feeding studies and stable-isotope studies using alpha LNA, which have addressed the question of bioconversion of alpha LNA to EPA and DHA, have concluded that in adult men conversion to EPA is limited (approximately 8%) and conversion to DHA is extremely low (< 0 center dot 1%). In women fractional conversion to DHA appears to be greater (9%), which may partly be a result of a lower rate of utilisation of alpha LNA for beta-oxidation in women. However, up-regulation of the conversion of EPA to DHA has also been suggested, as a result of the actions of oestrogen on Delta 6-desaturase, and may be of particular importance in maintaining adequate provision of DHA in pregnancy. The effect of oestrogen on DHA concentration in pregnant and lactating women awaits confirmation.

X-ray scattering study of the effect of hydration on the cross-beta structure of amyloid fibrils

We have investigated the effect of sample hydration on the wide-angle X-ray scattering patterns of amyloid fibrils from two different sources, hen egg white lysozyme (HEWL) and an 11-residue peptide taken from the sequence of transthyretin (TTR105-115). Both samples show an inter-strand reflection at 4.7 Å and an inter-sheet reflection which occurs at 8.8 and 10 Å for TTR105-115 and HEWL fibrils, respectively. The positions, widths, and relative intensities of these reflections are conserved in patterns obtained from dried stalks and hydrated samples over a range of fibril concentrations. In 2D scattering patterns obtained from flow-aligned hydrated samples, the inter-strand and inter-sheet reflections showed, respectively, axial and equatorial alignment relative to the fibril axis, characteristic of the cross-β structure. Our results show that the cross-β structure of the fibrils is not a product of the dehydrating conditions typically employed to produce aligned samples, but is conserved in individual fibrils in hydrated samples under dilute conditions comparable to those associated with other biophysical and spectroscopic techniques. This suggests a structure consisting of a stack of two or more sheets whose interfaces are inaccessible to bulk water.