RES exam question on Real Estate Market: An institutional property fund manager wants to reduce concentration risk in a Singapore…
An institutional property fund manager wants to reduce concentration risk in a Singapore real-estate portfolio. Consider which moves genuinely reduce concentration: (i) acquiring two more office buildings in the same CBD micro-location reduces concentration. (ii) adding industrial assets to a previously all-office portfolio diversifies by sector (iii) expanding into overseas markets with different cycles diversifies by geography (iv) staggering lease-expiry profiles across the portfolio diversifies income risk; Which statements are CORRECT?
- A(ii), (iii) and (iv) only
- B(i), (ii) and (iii) only
- C(i), (iii) and (iv) only
- D(i), (ii), (iii) and (iv)
Show answer & explanation
Answer
A. (ii), (iii) and (iv) only
Explanation
(ii), (iii) and (iv) genuinely diversify (by sector, geography and lease timing).
Why the other options are wrong
- (i) is wrong — buying more offices in the same micro-location increases concentration, so only (ii), (iii) and (iv) hold.
Study the concept behind this question: The Property Market & Government Intervention (Singapore)
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