Case Detail

Case Summary

The Search for Property: Institutional Investment in Real Estate

Case Number: 5-413-750, Year Published: 2014, Revision Date: June 30, 2016

HBS Number: KEL824

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Authors: Craig Furfine

Key Concepts

Financial Instruments, Private Equity, Real Estate, Risk Management, Portfolio Theory

Abstract

In the summer of 2013, Whitney DeSoto had just been hired as managing director for real assets at the Overton Pension Fund (OPF). Her task was to provide recommendations to the board of trustees to introduce real estate into the fund’s portfolio, which to date had been invested solely in stocks and bonds. Combining her knowledge of modern portfolio theory with her institutional expertise in real estate, DeSoto needed to decide what fraction of the fund should optimally be invested in real assets. She then faced the task of deciding whether to invest in public or private real estate. If she thought private real estate belonged in the portfolio, she would need to identify the best investment strategy, the best vehicle, and ultimately the specific investments to recommend.

Learning Objectives

After reading and analyzing the case, students will be able to:

  • Apply modern portfolio theory to the investment decision of an institutional investor allocating its assets between stocks, bonds, and real estate
  • Understand the limits of portfolio theory in a real estate context
  • Analyze the benefits/costs of investments in both public and private real estate
  • Understand the various vehicles in which one can invest in private real estate
  • Argue for a set of investments that offer individual benefits/costs relative to a theoretically ideal investment

Number of Pages: 18

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: United States

Industry: Real estate investment

Organization Name: Fictional

Decision Maker Position: Managing director

Decision Maker Gender: Female

Year of Case: 2013