REAL ESTATE - Belgian bank KBC’s €870m pension fund is to shift 3% of its equity allocation to real estate after ruling out investing in hedge funds.
Edwin Meysmans, managing director of the firm’s defined benefits scheme, said increasing the fund’s exposure to real estate from 7% to 10% “wasn’t a difficult decision”.
“We’ve always had around 7% in real estate and we’ve been happy with its performance in recent years – especially when you look at the returns on European quoted property,” he said.
“Once we’d decided to decrease our allocation to equities, the question was what we were going to do with it. We’re already invested 2.5% in private equity, which is about the right amount. We had long discussions about hedge funds but the lack of transparency concerns us. Anyway, which of the 8,000 do you invest in? Basically, you’d be forced into a fund of hedge funds.”
Half of the pension fund’s real estate allocation is in the KBC Asset Management pan-European real estate fund – “all kinds of companies in all countries” – with the remainder in domestic property funds, including the Belgian equivalent of REITs.
In 2005 KBC invested for the first time in infrastructure – an investment it plans to increase, possibly through its existing investment in the Macquarie European Infrastructure fund.
The KBC fund invests around €6m of a total real estate allocation of €60m directly, though it plans to divest its residential portfolio in the near future.
Instead, Meysmans and his team are looking to invest in unquoted European real estate via a new fund from KBC Asset Management in a bid to mitigate the risk of volatility associated with equities.
“Now we’ve taken the decision to reduce our equity allocation, we don’t want to expose ourselves to the same volatility because of the correlation between equities and quoted real estate companies,” said Meysmans.