A modern portfolio theory approach to asset management in the listed South African property market

Abstract

This report focuses on a Modern Portfolio Theory (MPT) approach to Asset Management in the Listed South African Property Market. The research was undertaken to fill the gap in property research on Modern Portfolio Theory in South Africa. The research set out to calculate the optimal portfolio weighting from historical data (1995 – 2006) from Investment Property Databank (IPD) by using a portfolio optimiser spreadsheet on Excel’s solver application. Interviews with Asset Managers were carried out to find out how many of them use MPT as a strategic portfolio tool when managing a property portfolio. The research proved whether MPT is used by Asset Managers in South Africa, as well as, how MPT should be used as strategic diversification tool and why it should be used