Seminar paper from the year 2007 in the subject Business economics - Miscellaneous, grade: 1,3, European Business School - International University Schlo? Reichartshausen Oestrich-Winkel, language: English, abstract: Constructing smart portfolios is the key goal of every investor regardless of the risk aversion. Accessible investments for investors are for instance stocks, bonds, treasury bills,and real estate. According to Seiler, Webb, and Myer (1999, p. 163) "real estate asset management has been and will continue to be a topic of great interest". In the year 1971 U.S. public real estate had a total market capitalization of US$1.4bn, while in 2006 public real estate had a market capitalization of US$438bn (National Association of Real Estate Investment Trusts [NAREIT], 2007, p. 1). The U.S. private real estate index has more thantripled from US$84bn in market value in the first quarter of 2001 to US$266m in the first quarter of 2007 (National Council of Real Estate Investment Fiduciaries [NCREIF],2007, p. 1. It is obvious that the real estate market has been growing incredibly and realestate has became more and more important as an investment opportunity. However, all available data on ownership of real estate show that pension funds hold 3.5% to 4.0% oftheir total assets in real estate (Chiochetti, SA-AADU, & Shilling, 1999, p. 193). Optimal allocation seems tobe a problem. Another point is that some degree of diversification can be achieved without real estat...