A mix of higher yields and ESG has prompted a greater appetite for real estate investment, research suggests.
Downing LLP, an investment manager, commissioned research that showed 86% of 50 UK defined benefit (DB) pension fund executives want to increase allocations to real estate development.
Nearly half, or 48%, of those questioned, answered that “support for ESG is driving increased allocations by DB schemes in real estate development finance”.
Fifty-eight percent felt the ability to offer attractive yields would also drive allocations.
The study showed that “real estate development finance is moving up the agenda for pension scheme managers”, said Parik Chandra, partner and head of specialist lending at Downing LLP. The firm interviewed 50 UK pension funds, who collectively manage around £125.5 billion in assets.
Almost all (96%) of the pension fund executives agreed that real estate could play a key role in helping DB schemes with de-risking “by delivering high and steady income while also matching liability cashflows and providing growth to help close deficits”.
Nearly one in five managers want a “dramatic increase” in allocations with DB schemes attracted by higher yields and the opportunity to meet goals by funding social real estate.
© 2022 funds europe
