IMPORTANT Risks and Limitations: The expectations or other information generated by the Real Assets Compass regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The expectations and other information are for educational and illustrative purposes only. Hypothetical performance has inherent risks and limitations, and prospective investors should not place undue reliance on any such information. The purpose of the Real Assets Compass is to demonstrate the potential benefits of adding real estate to a portfolio; it does not consider the possible benefits of adding any other class of investments to a portfolio. Because of Cohen & Steers' investment focus on real estate, Cohen & Steers will benefit from increased interest in the real estate asset class and you should keep this conflict in mind when evaluating the results from this tool. Other investments may have characteristics similar or superior to real estate investments. Additionally, Cohen & Steers may make investment decisions that are inconsistent with the Real Assets Compass’s outputs or any views expressed herein. Cohen & Steers may also develop and publish research that is independent of, and different than, the Real Assets Compass outputs or any views expressed herein.
The intent of the Real Assets Compass is not to predict or project future returns of any investment, asset class or portfolio. Instead, the purpose of the tool is to help understand how the addition of real estate investments to a portfolio of other investments might impact the returns of that portfolio, based on a number of assumptions and expectations, which may be incorrect, potentially materially so, and are subject to change without notice.
By receiving this communication, you agree with and acknowledge the limitations of the Real Assets Compass, the conflicts associated with the use of the tool and the restrictions on use described herein.
The information presented is provided as an educational tool, and is not intended to be and should not be relied upon as a recommendation to invest in any specific security or asset class or to adopt any investment strategy or as the primary basis for any investment decisions. Prior to making a decision to invest in any security or asset class, investors should consult with a financial professional to determine whether the decision is appropriate. Return, yield and volatility expectations are based on Cohen & Steers’ analysis, are not a guarantee of future performance and do not represent the past or projected performance of any investor or fund or account managed by Cohen & Steers.
The assumptions used to form the basis for the information presented are as of the date shown and are subject to change. Projected returns, yield, volatility and liquidity are subject to many factors that are uncertain and outside the control of Cohen & Steers, and analysis which may be subject to error. Projected outcomes depend on economic events, which even if they occur, could result in outcomes that could be materially higher or lower than expected. The performance outcomes displayed by the Real Assets Compass represent the mid point possible outcomes within a broader range of possible outcomes, some of which may be negative. Actual outcomes could be materially lower than the central outcomes. Models are inherently limited and do not account for the impact that economic, market or other factors may have on the real-time management of actual investments. Model results do not reflect actual trading, fees expenses and taxes that may impact results.
An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. Index comparisons have limitations as volatility and other characteristics may differ from a particular investment. There can be no assurance any trends or correlations shown herein would continue in the future.
The information presented is not being provided in a fiduciary capacity and does not account for the age, other investments, financial situation, tax status, investment objectives, investment experience, investment time horizon, liquidity needs and risk tolerance of any investor. We believe the information to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of appropriateness for determining any investment strategy. Cohen & Steers does not provide investment, tax or legal advice and will not advise on investment decisions. Investors should consult with their investment, tax or legal professional regarding their individual circumstances prior to making any investment decisions.
Investment Profile
Investment profiles combine risk tolerance and return objectives. Risk tolerances include low, medium and high. Investment objectives include income, balanced and growth. Traditional portfolio allocations, including stocks and bonds, are represented by the S&P500 Index and Bloomberg Barclays US Aggregate Bond Index, respectively. Traditional portfolio allocations are based on asset allocation models used to seek to achieve investment objectives while taking a certain level of expected risk. Other asset allocation models may provide materially different allocations between stocks and bonds.
Investment Objective
| Income | Balanced | Growth | ||
| Low | 30% stocks/70% bonds | 40% stocks/60% bonds | 50% stocks/50% bonds | |
| Risk Tolerance | Medium | 50% stocks/50% bonds | 60% stocks/40% bonds | 70% stocks/30% bonds |
| High | 70% stocks/30% bonds | 80% stocks/20% bonds | 85% stocks/15% bonds |
Criteria and Methodology for Determining Allocations and Expectations
Our process for determining the tool’s real estate allocations across listed and private real estate is driven by asset allocation principles with the goal of meeting risk-return objectives and risk tolerances while considering hypothetical investor preference for capital appreciation versus income generation. Volatility for each investment profile is roughly the same as for the allocation that excludes real estate.
Inputs to these expectations include return, volatility, and correlation across asset classes to generate outcomes that allow for diversification across multiple asset classes.
Assumptions are generally not updated on a real-time basis, therefore results may vary with each use and over time.
The highest risk tolerance and growth investment objectives generally will have the highest allocations to real estate with higher allocations to listed real estate. The highest income objectives generally will have a higher allocation to private real estate.
Cohen & Steers’ current expectation of future value based on current trends (“expectations”) for stocks are based on the S&P500[1]. Expectations for bonds are based on the Bloomberg Barclays US Aggregate Bond Index.[2] Expectations for private real estate are based on the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE).[3] Expectations for listed real estate are based on the FTSE NAREIT All-Equity REIT Index.[4]
Treasury bond returns are based on expectations for the level of inflation, the path of future short-term rates, and an expectation for the slope of the yield curve.
Credit returns are based on expectations of fair value spread levels along with adjustments for historical downgrade and default risk through an economic cycle.
All such expectations are subject to change.
Listed and private real estate returns are highly correlated over the long term, although listed real estate exhibits greater volatility in the short-run. Listed real estate is a leading indicator for private real estate both in downturns and in recoveries. Listed real estate may exhibit higher returns than private real estate given the higher general fee structure of the latter. There can be no assurance any such correlations will continue in the future. In addition, the Real Assets Compass tool does not take into account that investments in private real estate are often illiquid, and therefore a portfolio that includes private real estate will be less liquid than a portfolio that does not include it.
Yields on all markets are based on levels derived at year-end 2022.
Forward-looking volatility and correlation assumptions are based on historical outcomes. Volatility data use the full available data history available for each respective market. Correlation data use a common starting point. Future economic and market conditions could result in different experiences in coming years.
Due to the illiquid nature of private real estate, private real estate returns generally exhibit a return pattern that understates the level of volatility that would be realized if assets were valued more frequently. The Real Assets Compass uses a statistical adjustment [Geltner, David. 1993. “Estimating Market Values from Appraised Values Without Assuming”] to adjust for the first-order autocorrelation in the appraisal-based private real estate return series to arrive at an estimate that more accurately reflects the true volatility of private real estate returns for the time periods shown. This adjustment also is applied to calculations of private real estate correlation to other asset classes. As is the case for the other assets in the Real Estate Compass, estimates of volatility are utilized as an input to assess likely total portfolio volatility. Estimates are inherently uncertain and may not reflect actual outcomes. Utilizing different factors or assumptions in conducting the statistical analysis may result in materially different estimates than those shown. Investing in private real estate involves substantial risk, including entire loss of investment.
Certain inputs into the Real Assets Compass have been obtained from sources that Cohen & Steers believes to be reliable as of the date presented; however, Cohen & Steers cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content herein and inputs into the Real Asset Compass are current as of the date of publishment (or such earlier date as referenced herein) and are subject to change without notice. Cohen & Steers does not make any express or implied warranties or representations as to the inputs into the Real Assets Compass or the completeness or accuracy of its results.
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[1] The S&P 500 Index is an unmanaged index of 500 publicly traded large-capitalization U.S. stocks representing a variety of industries.
[2] The Barclays Capital U.S. Aggregate Bond Index is a broad-based index that measures the investment-grade USD-denominated fixed-rate taxable bond market.
[3] The NCREIF Fund Index—Open-End Diversified Core Equity Fund Index (NFI-ODCE) is a capitalization-weighted, gross of fee, time-weighted return index of the performance of the net invested capital of open-end funds whose investing style typically reflects lower risk investment strategies utilizing low leverage and generally represented by equity ownership positions in stabilized U.S. operating properties diversified across regions and real estate sectors.
[4] The FTSE Nareit All Equity REITs Index contains all tax-qualified REITs with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria.