Conditional allocations to real estate: An antidote to sequencing risk in defined contribution retirement plans
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Extract: Support for real estate as a viable alternative asset for inclusion in retirement portfolios has been reinforced by recent research efforts. Esrig et al.  demonstrated how real estate improved the historical risk-adjusted performance of target-date funds (TDFs). As an asset class, it continues to play a role in TDF glide path planning. This is applicable for long investment horizons that span multiple business cycles as well as for those near retirement seeking inflation protection and capital preservation. This finding harks back to the seminal contribution of Hudson-Wilson et al.  who first suggested that macro- economic factors have sufficiently converged to prompt defined contribution (DC) asset-allocation programs to invest in direct real estate. In a mean–variance framework, Hudson-Wilson et al.  showed that real estate investments achieve the majority of investors’ expectations, while Brounen et al.  and Chun et al.  found contrary outcomes when accounting for pension fund liability obligations.
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