The real estate industry has faced significant challenges in recent years, driven by factors such as the pandemic, digitalization, and economic shifts. These changes have impacted asset performance, valuation processes, and investment strategies. This article proposes an attribution framework to dissect the performance drivers of a diversified private assets portfolio, considering elements like leverage, currency exposure, and fees. By isolating market conditions, property-specific attributes, and financial strategies, the framework aims to provide a comprehensive understanding of what drives returns and where potential risks lie. The use of private benchmarks tailored to the strategy’s characteristics enhances the analysis, despite challenges related to data availability and valuation cycles. Ultimately, this approach enables more informed decision-making and better alignment with investment objectives in a complex real estate market environment.

Sylvain Desrosiers, CFA, FRM