An investigation into the role real estate investment play in diversifying portfolios of institutional investors in Namibia
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Date
2015
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
This research study investigated the role real estate investment plays in diversifying
portfolios of institutional investors in Namibia. The study was encouraged by the fact
that real estate investment in portfolios of most institutional investors in Namibia is
low, despite existing research studies having reliably reported attractive risk-return
attributes that would suggest much higher allocations. The research design applied
both the qualitative and the quantitative research approaches to collect both primary
and secondary data. The interviews and the questionnaire were used as the main
data-gathering instruments for the research. The relationship between the returns of
real estate investment and returns of equity, bonds and cash were analyzed to
ascertain diversification. The main fmdings of the research revealed that there were low negative correlation coefficients of real estate returns with the returns of bonds and cash. This therefore suggests that real estate could play the role of an effective diversifier by lowering volatility and boost returns for a given level of risk of the portfolios of institutional investors in Namibia. Statically, correlation coefficient results of the returns of real estate with other asset classes over the period 2007 to 2012 showed that there was a negative correlation coefficient of -0.014 between the returns of real estate with those of bonds and a -0.57 correlation coefficient between the returns of real estate and those of cash. However a positive correlation of 0.8% between the returns of real estate and those of equity was observed, suggesting that the diversification benefits between the two assets' returns was there but minimal. The main conclusion drawn from the study is that correlation coefficient results suggested that there was very little diversification benefits that real estate provided to portfolios of institutional investors in Namibia over the period 2007 to 2012, although no correlations were closer to -1 all were below 1 with some showing negative readings, indicating diversification potential for investing in real estate.
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration.
Keywords
Real estate