Canter was previously based in Baltimore as International Director for LaSalle Investment Management (Securities) and has been with the firm for more than 13 years. In addition to his new role, he will continue to act as global strategist and head of product development for the Securities division. 

Commenting on his new role and the expansion of the Securities business in Asia Pacific, Todd Canter says, “We are committed to growing our already strong resource base in Asia Pacific, continuing our tradition of providing local insights on markets and REIT management teams for every region around the world.

“Our exclusive focus on real estate, coupled with our extensive resource commitment, positions us to outperform for our clients in Asia and all around the globe.”

LaSalle Investment Management (Securities) has assets under management of US$9.4 billion as at 29 February 2008, of which nearly US$6 billion is invested in global mandates.  This forms part of LaSalle’s total global assets under management of US$50.4 billion as at 29 February 2008.

Canter recently authored a white paper entitled ‘The Diversification Benefits of REITs’, which examines the diversification impact of property securities on a mixed-asset portfolio consisting of global stocks and global bonds.

Each asset class was examined from a risk-return perspective and the results indicate that investors benefit from adding either Asian or global property to their traditional equity and bond portfolios, Canter said in the report.

The study examined the total returns for the three major assets from 1990 to 2007 and concluded the following:

- The best performing class was global property securities, which generated average annual returns of 10.71%, followed by Asian property securities with average annual returns of 9.39%.
- Both global property securities and Asian property securities had superior returns to global stocks and global bonds.
- The relationship between property securities and other asset classes, as measured by correlation of returns, was low-to-moderate, suggesting that property securities offer significant diversification benefits because they behave differently from the other asset classes.
- For portfolios with average risk tolerances, adding property securities resulted in increased returns of 148 basis points, while holding risk constant.

The results of this study indicate that property securities add significant diversification benefits to a mixed-asset portfolio. 

Canter went on to say, “Added return without added risk, that is the power of diversification and that is the power of Asian and global property securities in a mixed-asset portfolio.”

Appendix

THE DIVERSIFICATION BENEFITS OF REITS
By Todd Canter, CEO of LaSalle Investment Management (Securities) Asia Pacific
March 2008

Previous research has established the significant risk-reduction benefits of global property securities within a U.S.-based mixed-asset portfolio consisting of global equity stocks and global government bonds.  However, little research has been conducted to determine if these benefits extend beyond the U.S.  This study evaluates the impact of global and Asian REITs on a mixed-asset portfolio consisting of global stocks and global bonds.  The questions being addressed are, “Should an investor with exposure to global equities and global bonds seek to diversify by adding property?”  If so, “Should investors look to Asian property or global property as their solution?”  Each asset class was examined from a risk-return perspective and the results indicate that investors would gain considerable diversification benefits from adding either Asian or global property to their traditional equity and bond portfolios.

Total returns for the major asset classes from the time period 1990 to 2007 were examined.  The best performing asset class was global property securities, which generated average annual returns of 10.71%, followed by Asian property securities with average annual returns of 9.39% (all returns are denominated in U.S. Dollars). 

Over the time horizon studied, both global property securities and Asian property securities had superior total returns to global stocks and global bonds. At the same time, risk (as measured by annualized standard deviation of returns) was much higher for Asian property securities than all other asset classes. On a risk-adjusted return basis, global property securities came in lower than global bonds but higher than global equities. Asian property securities’ risk-adjusted returns were the lowest of the four asset classes examined.

In addition to examining returns we also analyzed the relationship between each of the asset classes.  The relationship between global property securities and the other asset classes, as measured by correlation of returns, during this time frame was low-to-moderate. This suggests that global property securities offer significant diversification benefits because they behave quite differently from the other asset classes over the time period measured.

Additionally, we examined correlations within the property markets and found that low to moderate correlations existed across all regions, meaning that property behaves quite differently from one region to the next.   For example, Asia’s property markets have a correlation of 0.32 to North America’s property market meaning that these two markets behave quite differently from each other.  Low correlations within property suggest that there is a second level of diversification benefits to be derived by building a global property portfolio.

In order to estimate the extent of the risk-reduction potential for global property securities, historical average returns, volatilities and correlations of all the asset classes were used to construct a series of efficient portfolios.  A portfolio is efficient when it offers the highest return for a given level of risk, or alternatively, the lowest risk for a given level of return. 

The following exhibit illustrates three portfolios.  The first is a portfolio consisting of global equities and global bonds.  The second portfolio builds on the first by adding Asian property securities.  As illustrated, the addition of Asian property securities adds significant value (45 basis points of return while holding risk constant) to the portfolio at the midpoint of the examined risk/return scale. 

Looking abroad, however, an Asian investor would have added even more value by diversifying their property holdings globally.  The addition of global property securities adds an incremental 103 basis points of return, while holding risk constant, to a portfolio already consisting of global equities, bonds, and Asian property.  Incremental portfolio returns are even greater at higher risk-return preference levels. 

The results of this study indicate that property securities increased portfolio returns by 148 basis points, at the midpoint of risk and return, while holding risk constant.  Investors could have realized added return by either adding Asian property securities or by adding global property securities to their mixed-asset portfolios.  Added return without added risk; that is the power of diversification and that is the power of property securities in a mixed-asset portfolio.

Todd Canter is CEO of LaSalle Investment Management (Securities) Asia Pacific