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Private Sector Pension Funds Investing in Real Estate

by Sarah Unsworth

  • 30 Nov 2011
  • RE

Of the 554 private sector pension funds that invest in real estate tracked by Preqin, 81% invest in private real estate funds, 57% invest in real estate directly and 33% invest in listed real estate.  The average target allocation to real estate for private sector pension funds is 9.3% of assets under management, and the average current allocation is 8% of assets under management.

37% of private sector pension funds have less than $100 million allocated to real estate. 24% have between $100 million and $249 million allocated to real estate, 16% have $250-499 million invested in real estate, and 20% have $500 million- $2.4 billion invested in real estate.  Just 3% of private sector pension funds have more than $2.5 billion allocated to real estate.

Of the 81% of private sector pension funds that invest in private real estate funds, 65% have a preference for investing in lower risk core funds. However, the next most popular fund strategy among private pension fund investors has a higher risk profile, with 44% of private pensions having a preference for opportunistic funds. 38% of private sector pension funds have a preference for core-plus funds and 24% for value added funds. 12% of private sector pension funds have a preference for real estate fund of funds, 11% for debt funds, 10% for distressed strategy funds and just 2% for real estate secondaries funds.

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