Judgments, forecasts and decisions: an analysis of fund managers over time

Decision theory is the study of models of judgement involved in, and leading to, deliberate and (usually) rational choice. In real estate investment there are normative models for the allocation of assets. These asset allocation models suggest an optimum allocation between the respective asset classes based on the investors’ judgements of performance and risk. Real estate is selected, as other assets, on the basis of some criteria, e.g. commonly its marginal contribution to the production of a mean variance efficient multi asset portfolio, subject to the investor’s objectives and capital rationing constraints. However, decisions are made relative to current expectations and current business constraints. Whilst a decision maker may believe in the required optimum exposure levels as dictated by an asset allocation model, the final decision may/will be influenced by factors outside the parameters of the mathematical model. This paper discusses investors' perceptions and attitudes toward real estate and highlights the important difference between theoretical exposure levels and pragmatic business considerations. It develops a model to identify “soft” parameters in decision making which will influence the optimal allocation for that asset class. This “soft” information may relate to behavioural issues such as the tendency to mirror competitors; a desire to meet weight of money objectives; a desire to retain the status quo and many other non-financial considerations. The paper aims to establish the place of property in multi asset portfolios in the UK and examine the asset allocation process in practice, with a view to understanding the decision making process and to look at investors’ perceptions based on an historic analysis of market expectation; a comparison with historic data and an analysis of actual performance.

In search of the aim of the free movement of persons provisions: has the Court of Justice missed the point?

The Court of Justice has, over the years, often been vilified for exceeding the limits of its jurisdiction by interpreting the provisions of Community legislation in a way not seem originally envisaged by its drafters. A recent example of this approach was a cluster of cases in the context of the free movement of workers and the freedom of establishment (Ritter-Coulais and its progeny), where the Court included within the scope of those provisions situations which, arguably, did not present a sufficient link with their (economic) aim. In particular, in that case law the Court accepted that the mere exercise of free movement for the purpose of taking up residence in the territory of another Member State whilst continuing to exercise an economic activity in the State of origin, suffices for bringing a Member State national within the scope of Articles 39 and 43 EC. It is argued that the most plausible explanation for this approach is that the Court now wishes to re-read the economic fundamental freedoms in such a way as to include within their scope all economically active Union citizens, irrespective of whether their situation presents a sufficient link with the exercise of an economic activity in a cross-border context. It is suggested that this approach is problematic for a number of reasons. It is, therefore, concluded that the Court should revert to its orthodox approach, according to which only situations that involve Union citizens who have moved between Member States for the purpose of taking up an economic activity should be included within the scope of the market freedoms.