Cohen & Steers and IDR launch hybrid real estate strategy

Global investment manager Cohen & Steers has teamed up with IDR Investment Management to introduce a new real estate investment strategy. 

Jon Cheigh

This innovative approach allows for tactical allocation to both publicly traded real estate securities (like REITs) and core private real estate within a single portfolio. The goal is to achieve better returns, lower risk, and reduced financial downturns over time compared to investing solely in core private real estate.
The strategy aims to exploit valuation differences that arise between the listed and private real estate markets. Experienced professionals from both Cohen & Steers and IDR will make tactical adjustments to capitalise on these discrepancies. It combines Cohen & Steers' extensive experience in managing listed real estate with IDR's proprietary method for replicating the NCREIF Fund Index (NFI-ODCE Index), giving it the unique ability to strategically adjust exposure to either listed or private real estate.
This new strategy offers several benefits to investors:
Better Risk-Adjusted Returns: It seeks to improve returns while maintaining comparable volatility to a traditional core real estate allocation.
Enhanced Liquidity: By combining actively managed listed real estate with core private real estate, the strategy offers greater flexibility and improved overall portfolio liquidity compared to direct private investments.
Broader Diversification: Investors gain access to a wider range of real estate sectors, including emerging REIT sectors like data centres and mobile towers, alongside traditional sectors like industrial and residential, allowing for better diversification and positioning for future growth.
Jon Cheigh, president and CIO of Cohen & Steers, said: “There is a lead-lag dynamic in real estate investing in which listed performance leads private in both downturns and recoveries, creating pricing differential opportunities for investors. By blending listed and private real estate in a single strategy, we can help investors capitalise on valuation mismatches between listed and private, delivering the potential for higher total returns and better liquidity.”
Garrett Zdolshek, CIO of IDR, added: “We are passionate about the benefits that indexing core private real estate provides investors as a tool to help them achieve their investment objectives. We believe this strategy presents investors with an innovative and holistic solution for managing their listed and private core real estate allocations. Cohen & Steers’ long-term track record of generating alpha and the firm’s steadfast commitment to excellence make them the ideal partner for this strategy.”