UK - Property investments will continue to outperform equities and bonds because of the high level and stability of its yields, ING Real Estate Investment Management predicts.
The fund manager said property income was currently around 2.5 percentage points above both equities and gilts, and there is little indication this gap will close in the near future.
Head of research, Ian Whittock, said: “A 2.5 point advantage is quite significant in an environment of low inflation where total returns are going to be a lot lower, going forward, than people have been used to.
“When there is not a lot of growth around and there is an atmosphere where investors are driven by fear rather than greed, to have such a head start in terms of income return is a big advantage.”
But he admitted property would not be immune from the downturn and capital growth would be small and yields would drop slightly.
Whittock contrasted this with the current state of equities where profit downgrades are the order of the day.
ING expects schemes to restructure their portfolios to include a higher proportion of lower risk investments and increased allocations to property.
Whittock predicted that – in a low inflation, low interest economy portfolio weightings may return to their position in the 1950s when equity allocations were much lower and property weightings were much higher.
Figures from performance measurer WM Company show that schemes, on average, allocated 7.1% to property last year against 5.8% in 2001.
Hymans Robertson partner and property specialist Geoff Singleton is recommending optimum levels for property allocations at between 10-15% for pension funds.
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?
RPMI Railpen is in the next step in the journey towards achieving cost disclosure. Victoria Bell tells Stephanie Baxter about taking part in the Cost Transparency Initiative's pilot phase
Interserve's numerous defined benefit (DB) schemes have retained a sponsor link after the company entered into administration and was sold.
Chris Hannon has been named chairman of the Railways Pensions Trustee Company after a unanimous vote of approval from its board last week.