The significance and performance of French REITs (SIICs) in a mixed‐asset portfolio

Purpose – REITs have taken on increased significance in Europe in recent years, with French REITs (Societe d'Investissement Immobilier Cotee (SIICs)) becoming an important property investment vehicle since 2003. The purpose of this paper is to assess the significance, risk‐adjusted performance and portfolio diversification benefits of SIICs in a mixed‐asset portfolio context in France over 2003‐2012. The impact of the global financial crisis (GFC) on SIICs and their post‐GFC recovery are also assessed. Design/methodology/approach – Using monthly total returns, the risk‐adjusted performance and portfolio diversification benefits of SIICs over 2003‐2012 are assessed, with efficient frontiers and asset allocation diagrams used to assess the role of SIICs in a mixed‐asset portfolio. Sub‐period analyses are conducted to assess the impact of the GFC on SIIC performance, as well as their post‐GFC recovery. Findings – SIICs delivered superior risk‐adjusted returns compared to stocks over 2003‐2012, but with limited portfolio diversification benefits with stocks and more portfolio diversification benefits with bonds. In the post‐GFC period, SIICs have delivered enhanced risk‐adjusted returns, but with no recovery in their portfolio diversification benefits with stocks. SIICs are seen to contribute significantly to the mixed‐asset portfolio across the risk spectrum in the post‐GFC period. Practical implications – SIICs are a significant REIT market at the French, European and global REIT levels. The results highlight the role of SIICs in a French mixed‐asset portfolio. The strong risk‐adjusted performance has highlighted the robustness of SIICs; particularly compared to French stocks, and the contribution of SIICs in a French mixed‐asset portfolio across the portfolio risk spectrum. This contribution by SIICs has been further reinforced in the post‐GFC period. Originality/value – This paper is the first published empirical research analysis of the risk‐adjusted performance of SIICs and the role of SIICs in a mixed‐asset portfolio. Given the increased significance of REITs in Europe, this research enables empirically validated, more informed and practical property investment decision‐making regarding the role of SIICs in a mixed‐asset portfolio; particularly in the post‐GFC period.