Until recently, most people have invested in a traditional portfolio consisting of stocks, bonds and real estates based on the three-division method of properties in Korea. However, this study analyzed the impact of the composition of a portfolio combining representative real estate indirect investment products such as REITs and real estate funds on the investment performance.
For this purpose, the empirical analysis using the mean variance model, which is the most appropriate method for the portfolio composition, was used. For variables used in this study, mixed asset portfolios were classified into Portfolio A through Portfolio G depending on the composition of assets, and the price indices selected as KOSPI, KRX BOND, REITs, TRUS Y7, HanwhaLasal, and OFFICE(Seoul).
In order to measure the return and risk of the mixed asset portfolio, correlation analysis, mean variance analysis, sensitivity analysis and principal component analysis were performed to derive the efficient frontier, and along with the minimum variance portfolio and the optimal risky portfolio, changes in the risk and return according to the increase in the proportion of real estates and real estate indirect investment products were analyzed.
The analysis results in this study are as follows.
In case of the minimum variance portfolio, Portfolio D, which combined bonds, stocks, REITs and real estate funds, and Portfolio G, which added the office, the actual real estate, were shown to have the lowest risk. On the other hand, it was shown that Portfolio C, which consisted of bonds, stocks and real estate funds, and Portfolio F, which added the office, the actual real estate, had the highest return.
In case of the optimal risky portfolio, Portfolio B composed of bonds, stocks and real estate funds and Portfolio D with added REITs had the lowest risk while Portfolio F composed of bonds, stocks, offices and real estate funds, and Portfolio G with added REITs were the most profitable.
Therefore, based on the optimal risky portfolio, it was found that Portfolio F and Portfolio G with low risks and the highest returns could be classified as risk preference while Portfolio B and Portfolio D with low returns and low risk could be classified as risk aversion. In addition, other portfolios could be classified as risk neutral.
The analysis of sensitivity response of target return according to changes in the asset proportion showed that KRX BOND and KOSPI fluctuated generally depending on the asset composition. In addition, when the proportion of the real estate fund and the office, an actual real estate asset, increased, the return increased, and when that of REITs decreased, the return increased.
On the other hand, the efficient frontier showed that Portfolio G and Portfolio F were the most efficient since they were located at the upper left corner, and Portfolio A and Portfolio B were relatively inefficient since they were located at the lower right.
As a result, it has been analyzed that it was more effective to compose a portfolio including REITs and real estate funds, which were real estate indirect investment products that eliminated the illiquidity limitation of real estates than real estates, the traditional three-division method of properties. Particularly, when real estate funds were included as investment assets, the overall risk and return of the portfolio were positively affected.
Therefore, it is possible to minimize the risk of investors and reduce the cost of ownership of the real estate by solving the illiquidity problem that is the biggest disadvantage of the direct investment, In addition, it is considered that it is more necessary to reinvigorate the real estate indirect investment market where small amounts can be invested.
Particularly, it is considered that there is a need for the system where investors are offered various opportunities by expanding investment institutions, developing various products and expanding new sales channels, and the companies receiving the investment stabilize businesses and generate profits to be distributed to investors through securing funds and new investments.