REITS: State of active management

This note summarizes current state of active profile in actively managed global real estate securities funds, as of Q4 2017. Active profile presented here relates to active share and the composition and distribution of total active share for the sector. It is well-known that an active share measure below 50% by definition implies that a portfolio includes negative expected alpha positions. 

Active Share Breakdown by Segment

Segments are defined as large-, mid-, and small-caps, each representing 1/3rd of total benchmark market capitalization. Active Share for the sector stands currently at 52%.

Active Share Utilization by Segment

Segments are defined as large-, mid-, and small-caps, each representing 1/3rd of total benchmark market capitalization. On average, full Active Share utilization of 50% is achieved in mid-caps of the investable  universe. Only 60% of alpha capacity is utilized in large-caps.

Active Share Utilization by Decile

Decile of total benchmark market capitalization. On the margin, full Active Share utilization of 50% is achieved in the 5th decile of the benchmark, approximately at half-point of investable universe. 

"Although active profile in the sector has improved over time, there are still important structural inefficiencies which will need to be addressed by active management in order to provide full benefit of listed real estate to investors who seek alpha from their allocations.", Witold Witkiewicz, Founder.

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Kania Advisors is an independent research and advisory firm focused exclusively on institutional real estate allocations and investment programmes. We provide advice and solutions to improve outcomes in real estate investment programmes. We conduct detailed industry research and custom studies typically focused on quantitative analysis and provide insights which form a critical part of a client's decision process.