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A portfolio manager is responsible for a portfolio of assets and typically operates for the benefit of a third party. Portfolio managers tend to operate at the strategic level, focusing on the development or clarification of portfolio risk and return objectives, on the construction and strategic management of portfolios, and on the monitoring of both market conditions and portfolio performance within the context of overall portfolio objectives. Asset managers and property managers tend to focus more on tactics, i.e., on the implementation of portfolio strategy. Asset managers typically report to portfolio managers and work through third-party property managers, who report to the asset managers. Asset managers, therefore, are focused on managing collections of assets (as opposed to portfolios) and often are regionally focused. Their primary objective is to coordinate the activities of local property management personnel toward the achievement of the portfolio strategies established by the portfolio managers to whom they report. Property managers typically are responsible for managing the day-to-day operations at the property level, either full-time on-site at one property or for a collection of properties within a specified submarket, market or region. Duties usually include leasing and property operations (maintenance, engineering, tenant relationships, on-site construction management, property-level accounting or data entry, and such). Property managers either report to portfolio managers (in vertically integrated companies) or to asset managers (in companies that are not vertically integrated).

Most investors in “core” properties (i.e., high-quality, stable, income-producing office, industrial, multifamily and retail properties) expect to receive around 8 percent to 9 percent on their unleveraged real estate investments. If they use leverage, they tend to leverage assets between 5 percent and 60 percent, with average portfolio leverage ranging between 20 percent and 40 percent. Leveraged return expectations for core real estate investments, therefore, range between 10 percent and 15 percent. Investors typically expect value-added investment returns of between 12 percent and 15 percent and opportunistic returns in excess of 18 percent to 20 percent.

Pension portfolios for the most part consist primarily of stocks, bonds and money market instruments. Real estate and other assets, such as private equity or venture capital, play a relatively small role, primarily as a diversification tool. Allocations to real estate typically range between 5 percent and 10 percent. However, keep in mind that only a small percentage of U.S. plan sponsors invest in real estate because most plans are too small; of the approximately 70,000 plan sponsors in the United States, only an estimated 2,000 to 2,500 include real estate in their portfolio mix.

The most important trend in real estate portfolio management is an awareness that it exists as a profession, and that its practice is important. Most of the 1980s and 1990s were dedicated to the assembly of portfolios. While assembling portfolios is still a concern, especially with the global competition for good properties at attractive prices, the need to manage portfolios prudently also has become important. The primary role of a portfolio manager is to help define portfolio objectives, and then to construct and manage the portfolio so as to achieve those objectives at the lowest tolerable level of risk.

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