GLOBAL - UK real estate allocations are at a cyclical low with institutional investors far underweight their desired allocation to property in multi-asset class portfolios, according to Fidelity International.
However, this is set to change with the €4.3trn in assets European pension funds held in property in March 2005 expected to increase by €150-365bn, according to data from UBS, Intech, PREA and Russell.
A key driver is said to be the advent of real estate investment trusts (REITs) in the UK. According to Fidelity, the implementation of REITs on 1 January next year in the UK, and potentially in coming years in Germany, represents a growing global trend to securitise property assets.
REITs are special investment vehicles for investing in property which have tax exemptions in return for distributing the majority of their income through dividend payouts to investors.
Outlining the securitisation trend, Steven Buller, portfolio manager, Fidelity Global Property Fund based in Boston, said currently one in 10 buildings were owned by publicly listed companies globally, but growth is forecast at 10% annually over the next five years.
With the Australian REITs market becoming saturated, Buller conceded that the UK REITs market could see large inflows from superannuation funds.
“Australian superannuation funds are the net exporter of property capital, both buying buildings directly and buying shares,” he said.
“They bought in the US when there was a compelling argument to buy on both a spread and currency basis, (which is no longer there), they then moved to Japan and now Europe.”
The Pension Protection Fund (PPF) is consulting on proposals to charge a "risk reflective" levy for commercial defined benefit (DB) consolidation vehicles.
The funding gap across FTSE 350 schemes could be slashed by as much as £275bn if schemes look beyond traditional ways of creating value. Victoria Ticha examines how
There will be "many flavours" of defined benefit (DB) consolidators but consolidation will only be the right answer for a minority of schemes, Alan Rubenstein says.
Work and Pensions Committee (WPC) chairman Frank Field has questioned the regulator on what lessons it can learn from the experience of the Kodak Pension Plan No.2 (KPP2).