Geographical Allocation in Investments of German Open-ended Real Estate Funds: Does Expectation Impact Country Allocations?
Purpose: The article looks at the geographical allocation of real estate investments from German open-ended funds within the last years. The purpose is to identify the changes in geographical allocation within four main European target countries. The main focus is to research whether German open-ended real estate funds reallocated investments from UK to other countries due to expectations of exit from European Union as triggered by the poll in United Kingdom in year 2016. Therefore, the main target of the exploration is to research if a preemptive “BREXIT-expectation-effect” can be found in data.
Methods: Based on the theoretical framework considering the role of expectations as found in economic theory, the realized changes in country-specific portfolio allocations of German open-ended funds are compared to investor sentiment voiced in the immediate Brexit-poll-phase.
Findings: The article finds that – unlike common belief – the Brexit poll from 2016 has not caused fund and portfolio managers from German open-ended real estate funds to significantly diminish holdings in the United Kingdom in favor of holdings in other European countries that may appear beneficiaries of Brexit. It furthermore shows that allocations to United Kingdom have increased at times after the Brexit poll in year 2016. The timespan of the research cannot grasp the post-Brexit execution period, as this is too early to research, given the current postponement of BREXIT execution to January 2020.
Research implications: The research shows that fund and portfolio managers adapt their allocations much more cautiously to expectations, more relying on acutal fundamental economic data and investment opportunities in business cycles than on common sentiment.
Keywords: real estate funds, asset allocation, Brexit, investment strategy
JEL codes: F3, G150, G4
Category of the paper: research article
CITATION (APA): Funk, B. (2019). Geographical Allocation in Investments of German Open-ended Real Estate Funds: Does Expectation Impact Country Allocations?. World of Real Estate Journal, 110(4), 5-14.