The key question that underlies this paper is whether real estate will continue to have a place in a mixed-asset portfolio, when institutional investors can select from a range of investments outside the core asset classes of bonds and equities. It is often stated that hedge funds, private equity and commodities all offer the benefit of portfolio diversification due to a low correlation with equities. This diversification potential is often used to argue for the inclusion of real estate in a portfolio, hence, if these benefits can be obtained in another way, with the added benefit of liquidity and lower transaction costs, does it imply that real estate allocations will fall? In this paper we investigate in detail the risk and return characteristics of real estate and a selection of alternative assets, the benefits that arise from diversification and role of these assets in an institutional investorís portfolio.