Investment firm Cohen & Steers has released a new tool for advisors and institutional investors to illustrate the impact real estate investments can have on a person’s portfolio.
The New York-based firm, which specializes in real estate investing, unveiled its Real Assets Compass this month. The online tool displays the returns, yield, volatility, and sharpe ratio of a portfolio that includes real estate assets, according to Jeff Palma, head of multi-asset Solutions at the firm.
“It’s a starting point for how we view the world and the role that real estate can play, but it allows that customization as to see how a portfolio would behave in different mixes,” he said.
The advisor can plug in the total size of their clients’ portfolios and customize the starting allocations of stocks and bonds to match their risk tolerance, the total real estate allocation, and mix between listed and private real estate, Palma explained. The tool then illustrates, through a pie chart and raw numbers, what the portfolio will look like with the real estate investments included, Palma said.
Advisors can look back at how the portfolio would have performed over the last 30 years and customize it to use either reported or adjusted volatility for private real estate. They can also look ahead at the potential return that could be generated in the next 10 years.
Advisors can download and print the report to show to their clients, according to the firm.
Cohen & Steers was founded in 1986 and has specialized in real estate assets. More than half of its $83 billion in assets under management are in real estate, according to a firm spokeswoman.
Even though real estate is the third largest asset class, it is not as well utilized by investors and Palma said the new tool demonstrates to advisors why they should be considering real estate assets more in their clients’ portfolios.
“We believe that in general too few investors recognize the benefits of having real estate in their portfolio,” he said. “This was one way for us to be able to communicate to those investors who are not already in real estate to be able to see some of the benefits of adding real estate to a portfolio.”
The tool is currently available on the firm’s website exclusively for advisors at no cost.