Tuesday, July 7, 2009

30 years of research shows apartments have the best track record for risk-adjusted returns

In its review of 30 years of data, Torto Wheaton Research recently reported to the National Multi-Housing Council that apartments "...have proven to be most resilient during economic downturns, delivering superior returns during recessionary periods."

Period Ending 2008 Q4, Years

5

10

15

20

25

30

Apartments

Ave. Compounded return, %

12.5

11.64

11.85

20.06

10.19

11.72

Sharpe Ratio

1.27

1.45

1.64

0.72

0.64

0.71

Industrial

Ave. Compounded return, %

13.54

11.98

11.93

9.25

9.66

10.56

Sharpe Ratio

1.51

1.45

1.32

0.44

0.43

0.47

Office

Ave. Compounded return, %

14.64

11.85

11.44

7.8

7.89

9.7

Sharpe Ratio

1.45

1.07

0.85

0.19

0.13

0.24

Retail

Ave. Compounded return, %

15.58

13

10.9

9.4

10.34

10.39

Sharpe Ratio

1.66

1.33

0.85

0.47

0.55

0.45

Hotels

Ave. Compounded return, %

14.38

10.36

13.37

10.56

9.3

NA

Sharpe Ratio

1.25

0.7

0.84

0.45

0.26

NA

Total

Ave. Compounded return, %

14.1

11.92

11.21

8.68

9.07

10.18

Sharpe Ratio

1.61

1.37

1.11

0.36

0.35

0.4

  • Sharpe Ratio = Period Average (Compounded Return – 10-year Treasury Bond) / Period
  • Standard Deviation (Compounded Return – 10-Year Treasury Bond)
  • Grey color highlights the highest return; green color highlights the highest ratio of average annualized return to standard deviation

Data: National Council of Real Estate Investment Fiduciaries and Torto Wheaton Research (TWR) From the report: “A Case for Investing in U.S. Apartments” prepared by TWR for the National Multi-Housing Council (March, 2009).

Download the full 17 page report here.