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Institutions Struggle with Denominator Effect

Published Monday, June 09, 2008

Just when many institutional investors have committed larger pools of money to the commercial real estate sector for the first time in years, those same investors are potentially facing the very real need to sell off a portion of their commercial real estate portfolios in order to maintain pre-set target investment allocation levels. This quandary is known as the “denominator effect.” As the value of different asset classes — stocks and bonds for example — falls, the value of allocations to other assets, including commercial real estate, rises above allocation targets, triggering ...

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