UK - British pension funds have been slower to invest in listed property than their global counterparts, claimed Stephen Hayes of boutique manager Perennial Real Estate Investments.
As more countries introduce legislation to support real estate investment trusts (REITs), global pension fund interest in securitised property has increased.
Hayes said: “Most other pension schemes around the world have been taking advantage of the move to securitisation, but the UK is only now beginning to allocate in this way."
However, Hayes, managing director and portfolio manager at Perennial, said while UK pension funds had traditionally been “very much wedded to investing directly” in property, there had been an obvious growth of interest in listed vehicles during the past year.
According to Perennial, 70% of Australian pension fund investment in property is in listed funds. In the Netherlands, this figure stands at between 50% and 70% and US pension funds tend to target a 50/50 split between listed and direct investment.
“We are seeing a massive strategic allocation shift to listed global property,” confirmed Marsha Beck, head of manager investment services at Perennial Investment Partners.
Hayes said pension funds were attracted to securitised property by the stable cash flows, fixed assets and “phenomenal” ability to add value. He claimed the long duration needed for investment in the asset class (three to five years) was a good fit for pension funds.
Perennial Real Estate, which opened to business 14 months ago and currently has US$3bn under management, is in the final stages of launching a UCITS fund in the UK and is in talks with a number of potential seed investors.
Europe is seen as big potential market for Perennial, both in terms of investors and investments.
As Hayes pointed out, 30% of investment grade real estate in Australia is securitised, but this figure is only 5.5% in the UK and 2.2% in continental Europe.
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