UK - A member of the UK’s National Association of Pension Funds (NAPF) property investment committee has suggested its role should include thought leadership to increase interest in real estate.
Speaking at the joint IPD / Society of Property Researchers Real World Conference in Cambridge earlier this week, former Cornerstone Real Estate Advisers chief executive Iain Reid said that despite sitting on the NAPF committee with three large consultancies, he had “no idea” of pension fund sentiment towards real estate.
He added that the industry required thought leadership to drum up support for investment by pension funds.
“I see that committee, actually, as potentially a focus for providing at least some of that thought leadership.”
Speaking during the same session, InProp Capital founding partner Paul Ogden said that consultants would be key to bringing pension funds into the real estate debt market as banks are forced to retreat and deleverage under new capital funding requirements.
Ogden said it would “fascinating” to hear consultants’ views of the property debt market, as they would be vital in launching the alternative lenders “everybody is talking about flying in to save the day”.
He added that the debt’s similarity to corporate bonds could be an advantage.
“Corporate bonds are getting expensive because sovereigns are too much in demand now. So there is an opportunity there for consultants to really change the way things work now,” he said.
The conference also discussed how to attract defined contribution (DC) funds to real estate and accommodating their need for liquidity.
Schroder Property’s head of property research Mark Callender said the funds looking to target the growing DC market should be able to offer “at least” weekly liquidity and be open-ended and listed.
“Clearly liquidity is always a problem for property and in the UK at the moment a lot of the property funds we have got fall foul of one or two of those two conditions,” he said.
Ogden, whose company launched a synthetic property fund to address liquidity concerns, pointed to derivatives as useful tool in meeting liquidity requirements and defended their use.
“There is a perception there that derivatives are complex and dangerous when in reality, the vast majority […] are very simple.”