This article examines the risk-return trade-off of a mixed-asset portfolio that includes real estate using copula functions. In particular, it analyses the role of direct as opposed to securitised real estate in terms of diversification when the dependence structure is modelled by an appropriate copula. The empirical analysis is conducted using Swiss data for the period 1987–2003. It is shown that a better portfolio diversification is obtained with indirect than with direct real estate. This finding has important practical consequences for asset allocation decisions.