Determine which asset class is most likely to meet Pua’s investment objective. Justify your response.

Five years after his first meeting with Pua, Greslö monitors a private real estate investment that Pua has held for one year. Until recently, the investment had been managed by a local real estate specialist who had a competitive advantage in this market; the specialist’s strategy was to purchase distressed local residential housing properties, make strategic property improvements, and then sell them. Pua is one of several clients who have invested in this opportunity.
Greslö learns that the specialist recently retired and the investment is now managed by a national real estate company. The company has told investors that it now plans to invest throughout the region in both distressed housing and commercial properties. The company also lengthened the holding period for each investment property from the date of the initial capital call because of the complexity of the property renovations, and it altered the interim profit distribution targets.

Ingerðria Greslö is an adviser with an investment management company and focuses on asset allocation for the company’s high-net-worth investors. She prepares for a meeting with Maarten Pua, a new client who recently inherited a $10 million portfolio solely comprising public equities.
Greslö meets with Pua and proposes that she create a multi-asset portfolio by selling a portion of his equity holdings and investing the proceeds in another asset class. Greslö advises Pua that his investment objective should be to select an asset class that has a high potential to fulfill two functional roles: risk diversification and capital growth. Greslö suggests the following three asset classes:

Transcribed Image Text:

Determine which asset class is most likely to meet Pua's investment objective. (Circle one.) Public Real Estate Private Real Assets (Timber) Equity Long/Short Hedge Funds Justify your response.