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An asset allocation survey has suggested that European and North American pension funds are planning to increase investments in real estate over the coming year and the majority of schemes are reviewing external managers.
Findings of a study conducted in December by Bfinance indicated that there is still a trend among the 63 schemes surveyed to move towards riskier assets, and 27 per cent of those questioned said they are planning to increase their target allocations to property over the next six months.
The leading beneficiary of the continuing diversification process seems to be property. During 2008 and a good part of 2009, property investors saw their capital value drop and their equity in leveraged vehicles being wiped out. Today, certain sectors in real estate remain in deep freeze, characterised by a lack of transactions even as the stock market rally continues unabated with the S&P 500 up 65 per cent between March 9 and December 23, 2009. “We are still down in a trough,” notes Christopher Ailman, CIO of the €81bn CalSTRS which announced a 40 per cent write-down in real estate for the fiscal year ending in March. “We may be able to see the light at the end of the tunnel, but it is really far away right now. There is a lot of commercial real estate debt that will come due in 2010. It will be interesting to see if any of the banks or traditional debt providers will step into this market. There is a lot of uncertainty that they will.”