Real estate provides inflation hedging – but only over the long-term

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Real estate investment provides a good hedge for inflation liabilities but only if it is conducted on at least a 20-year timeframe, says Pete Gladwell, client portfolio manager at UK firm Legal & General Property (LGP).

Asset-liability management (ALM) using real estate is more effective in the long-term when average rental growth is correlated with average retail price index (RPI), according to LGP. However, on an annual basis, rental growth fluctuates heavily – often in the opposite direction