GLOBAL - Defined contribution (DC) funds must accept a level of illiquidity if they wish to seek exposure to real estate, according to delegates at the recent IPD European Property Investment conference.
Following on from comments made by Paul Trickett, Goldman Sachs Asset Management's head of global portfolio solutions, that property risked being a "forgotten" asset class as the pension industry shifted from defined benefit (DB) to DC, delegates were asked their views on the level of liquidity required to attract the funds.
Rory Morrison, senior director of fund management at Invesco Real Estate Europe, dismissed any need for liquidity, saying: "It is illiquid, don't kid yourself."
He said real estate investment trusts (REITs) served as a good proxy, but dismissed the idea that all DC assets needed to be liquid.
"Certainly, if you like real estate, you need to accept that it is illiquid," he said.
Xavier Denis, member of the executive committee and the board of directors at Cofinimmo, pointed out that there were "different degrees of liquidity", starting with REITs and moving through the other available investment options.
An audience member meanwhile cited a US scheme's use of real estate in target date funds as a way forward, explaining that the fixed date of the payout assisted in overcoming the liquidity problem.
However, pension funds have found other ways to access real estate-like returns, with some opting for strategies that see them exposed to a selection of listed real estate companies' shares in an effort to replicate the returns of the physical asset.
The UK's National Employment Savings Trust, a trust-based DC scheme, recently won best newcomer at the IP Real Estate Awards in London for planning such a strategy.
