The Use of Benchmarks for Real Estate Portfolio Performance by U.K. Financial Institutions

The paper examines the application of benchmarks in the United Kingdom primarily through the use of semi-structured interviews with 17 major investment houses, holding domestic real estate assets under management of nearly £180bn with in excess of £515bn in other countries. The MSCI/IPD database is the predominant reference point for peer and relative benchmarking, but funds also apply an absolute benchmark approach. Many fund houses indicated a reluctance to change benchmarks. However, increasing short-termism and the transformation of market fundamentals after the GFC have led to a reappraisal of the nature of existing benchmarks and there is a continuing move toward use of alternatives.