Inter-relationship and performance analysis between direct and indirect property investments in Nigeria

Abstract

Over the years, real estate investment had become a very significant investment choice for investors across the globe. However, in doing or embarking on the venture, it is also important to notice that the sector of real estate is enjoined into two main categories; the direct and indirect real estate investments. During the era of global capitalism, most direct capital investments were real estate or related to infrastructural developments, while indirect financial investments were carried out through securities and debts instruments which were secured on real estate as collateral. The acquisition of property shares in investment companies have become a popular way of indirect property investment. However, the publicly listed property companies and property construction companies are just a small portion of the total property markets, and the pace of the securitisation had been very slow in Nigeria over the years. This dissertation examines the performance of direct and indirect property investments in Nigeria from 2013 to 2017 with a view to revealing the diversification potentials. This risk/ return adjusted performance of the Sharpe ratio shows that the listed construction companies and the REITs are not performing credibly well, however, they still do offer some diversification possibilities as a result of the low correlations with each other. To successfully conduct this work, the performance of the direct and indirect property investments were analysed, the relationship of the direct and indirect property investments were also investigated and the potentials for portfolio diversifications were determined in Nigeria.