| Abstract [eng] |
The global real estate market, estimated to be worth $379 trillion in 2023, surpassed the market cap of traditional equity markets, and its under-inclusion in pension fund strategies may be a missed opportunity. This paper analyses the opportunity to optimize pension fund investment portfolio by including REIT funds as an alternative asset class. Given the long-term investment strategy of pension funds and the growing need to diversify portfolios, the paper examines how real estate integration can affect the return and risk of the investment portfolio of the Lithuanian pension fund GoIndex. Based on a literature review and empirical research, the characteristics of real estate investments are discussed. The aim of the work is to determine whether the inclusion of real estate in an investment portfolio improves its risk-return ratio. To achieve this goal, a correlation analysis of portfolio assets and comparisons of statistical characteristics are performed. 3 different optimization methods are used to optimize portfolios in order to assess the weight each of them will assign to the added real estate class. At the end of the study, a portfolio sensitivity analysis is performed and Monte Carlo simulations are performed for one year in advance in order to see the behavior of portfolios under various scenarios. The conclusions present whether exchange-traded real estate funds can be included in pension fund investment portfolios as a means of optimizing their structure in order to improve the risk-return ratio. |
