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MSCI Survey Reveals Challenges to Long-Term Asset Allocation and Risk Management in Real Estate Investments

  MSCI Survey Reveals Challenges to Long-Term Asset Allocation and Risk   Management in Real Estate Investments  Business Wire  NEW YORK -- February 25, 2014  MSCI Inc. (NYSE:MSCI), a leading provider of investment decision support tools worldwide, has published the results of its bi-annual survey of asset allocation practices among pension funds and sovereign wealth funds around the world. The report, titled “Long-Run Investment Ambitions and Short-Run Investment Processes,” finds long-term asset management challenges and increasing risk management in real estate investments.  “The survey results show that the biggest challenge these asset owners face is unifying long-term goals with the short-term nature of asset management. There is no consensus in either the frequency with which they make strategic asset allocation decisions or in the methods they use to do it. This can lead to wide variation in investment outcomes,” said Neil Gilfedder, Managing Director and Head of Analytic Applied Research at MSCI.  The survey also found that 95% of respondents plan to increase or maintain allocations to alternative asset classes. “The reasons asset owners give for holding alternatives are quite diverse,” Gilfedder continued. “When they invest in real estate in particular, some asset owners are looking for returns, others for income and still others for diversification of risk. Without a clear understanding of how alternatives contribute to the risk and return of an overall portfolio, they have no basis for setting expectations with regard to investment outcomes.”  As part of the study there was an exploration of the steps being taken by asset owners to strengthen risk management of real estate exposure. Based on publicly available data of a 138 global asset owners, the research analyzed the use of benchmarks and the monitoring of portfolio and asset-specific risks. It found that although70% of asset owners have real estate policy benchmarks, over 80% of them have some benchmark misalignment, often using domestic benchmarks when investing in foreign markets.  “The findings reveal significant variations in the role of real estate in investor portfolios, creating the potential for inaccurate views of actual exposure,” said Peter Hobbs, Managing Director of Research for MSCI-IPD. “Asset owners are working hard to overcome these challenges by better integrating real estate with other asset classes and tightening up their risk management practices.”  Survey Methodology  The survey was conducted in Q4 2013 with 80 global asset owners, whose assets totaled close to $4 trillion. Interviews were carried out in person and online. Respondents were CIOs, CROs, Portfolio Managers, Senior Risk Analysts and Middle Office heads. These responses were supplemented by asset allocation and real estate allocation data gathered from the annual reports and other public documents of 138 global asset owners, representing $10.3 trillion in assets.                                      -Ends-  About MSCI  MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools.  The company’s flagship product offerings are: the MSCI indices with approximately USD 8 trillion estimated to be benchmarked to them on a worldwide basis^1; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; IPD real estate information, indices and analytics; MSCI ESG (environmental, social and governance) Research screening, analysis and ratings; ISS corporate governance research, data and outsourced proxy voting and reporting services; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world.  ^1As of March 31, 2013, as reported on July 31, 2013 by eVestment, Lipper and Bloomberg  For further information on MSCI, please visit our web site at  This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved in making or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information may not be reproduced or redisseminated in whole or in part without prior written permission from MSCI.  The Information may not be used to create derivative works or to verify or correct other data or information. 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MSCI’s indirect wholly-owned subsidiary Institutional Shareholder Services, Inc. (“ISS”) is a Registered Investment Adviser under the Investment Advisers Act of 1940. Except with respect to any applicable products or services from ISS (including applicable products or services from MSCI ESG Research, which are provided by ISS), neither MSCI nor any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and neither MSCI nor any of its products or services is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.  The MSCI ESG Indices use ratings and other data, analysis and information from MSCI ESG Research. MSCI ESG Research is produced by ISS or its subsidiaries. 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