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North America-Based Private Sector Pension Funds Investing in Private Real Estate – August 2014

by Brian Chung

  • 18 Aug 2014
  • RE

Preqin’s Real Estate Online service currently tracks 392 North America-based private sector pension funds currently investing in private real estate funds. These private pension plans have aggregate assets under management of more than $2.4tn and, on average, currently allocate 7% to real estate, meeting their average target allocations.

In terms of geography, 94% of these investors prefer to invest domestically in North America-focused funds, compared to 32% of investors favouring Europe-focused real estate funds. Private real estate funds investing in Asian property markets are utilized by 24% of North American private sector pension plans.

When making private real estate fund commitments, 67% of investors favour low-risk core strategy funds, with core-plus strategies utilized by 37% of investors. Higher-risk strategies, including value added and opportunistic funds, are preferred by 58% and 48% of private sector pensions respectively. Forty percent of investors will make commitments to debt funds, with 30% investing in distressed funds. Among the least favored fund types by North American private sector pensions are fund of funds and secondaries funds, utilized by 11% and 7% of these LPs respectively.

Many North America-based private pension funds will be making commitments to real estate funds in the next 12 months. Michigan Laborers’ Pension Fund will commit between $20mn and $30mn across five to seven real estate funds with existing fund managers in its portfolio, as well as forming new GP relationships. The ConAgra Foods Pension Plan, a $3.5bn Nebraska-based pension plan, will in the next 12 months make commitments to US-focused core private real estate funds with GPs it has yet to work with.

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