GERMANY - The €2.1bn pension fund for the dentists of the west-German region of Westfalen-Lippe is pulling out of direct real estate and looking to diversify its alternative investments.

The fund will gradually replace its direct real estate holdings, making up the majority of its €324.9m real estate exposure, with real estate fund investments. 

Ulrich Wunderlich, head of asset management, told IPE: "It is getting more difficult to deal with landlords as negotiations are getting tougher - and we do not want to bother with this."

He said the fund was also looking at possible private equity exposure - "maybe via secondaries" - but added that nothing had been decided.

Last year, the fund made its first foray into timber with a €10m investment diversified into funds from various regions.

Other alternative investments include a commodities fund administered by the dentist fund's Master KAG, which is also running a currency overlay.

Wunderlich added he was "quite glad" his fund had no investments in hedge funds.

For 2009, the fund reported a 4.4% return and has now started to bring its equity exposure back up from the 2009 lows to around 10%, still well below the previous level of 20%.

Wunderlich said the fund was not looking to change its bond portfolio, as it had already been well diversified, including an exposure to emerging market bonds.