This edition of IPE Real Estate highlights three investor groups grappling with change. Two of them are effectively having it imposed on them.

The UK’s 101 Local Government Pension Schemes (LGPS) – which own more than £230bn of assets between them – are being forced to consolidate into several investment pools – or, as the Chancellor George Osborne has described them, “British wealth funds”. Osborne hopes to fill the country’s infrastructure funding gap, and this requires scale.

But the LGPS pooling debate has implications beyond infrastructure. What does it mean for the £13bn in property owned by the schemes? Incumbent real estate multi-managers perhaps have the biggest cause for concern, as one of the most likely outcomes is a move to more direct investment approaches. In the latest issue of IPE Real Estate we look for some answers.

The seven or so consolidated LGPS pools would still pale into insignificance next to Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund. GPIF and the three other so-called ‘pension whales’ are preparing to invest in global real estate.

But it will be a challenge to build up a meaningful allocation to real estate when GPIF has more than $1trn in assets. Norway’s sovereign wealth fund has done well to aggregate assets since creating its real estate allocation several years ago, but it is still some way off its initial 5% allocation target.

Fortunately, Norges Bank Investment Management was able to buy portfolios and large single assets when pricing was not as high as it is today. GPIF, on the other hand, faces entering a market when some commentators are urging caution.

US pension funds, often among the most aggressive deployers of capital, are becoming increasingly cautious. In the previous edition of IPE Real Estate we reported on how US-headquartered LaSalle Investment Management was advising investors to prepare for the next downturn; we talk to the Employees Retirement System of Texas about adopting a “holding pattern”.

“We want to see how the markets shake out,” says Robert Sessa, director of real estate at the $25.5bn pension fund. “We’ve put a lot of capital to work, so we’re not in any rush to put capital to work right now.”

But it’s not just market cycles that US pension funds are responding to. Some are beginning to reassess the closed-ended fund model, whose finite life periods could become increasingly out of sync with their maturing liability profiles. Some pension funds and advisers are looking to design new structures – as Texas ERS portfolio manager Adam Cibik, describes, structures that enable investors to “control exits over time, so exits are not based on an IRR where the manager is incentivised to sell as soon as possible.”