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Abstract
Executive Summary.In the current environment, investors are increasingly asking: does real estate offer enough return to warrant the risk? In particular, do investors really understand the increased risk they are taking on in the trend of recent years toward ever higher risk strategies in closed-end funds? To better inform institutional investors in making this decision, this paper offers some new views. First, it classifies and evaluates risk by its impact on the various components of portfolio returns. Second, these risks are considered in the strategic contexts of core, value-added, and opportunistic investing. Examining the interplay of risks reveals a particularly high concentration of risks in the opportunity fund arena. Finally, to control risk, this paper offers some management choices available to institutional investors: time horizon, diversification methodologies, hedging approaches, and strategic choices to limit risks.