The next few years will offer an unprecedented buying opportunity. Should pension funds be looking to time the market or waiting for signs of a recovery?

SAMPENSION KP LIVSFORSIKRING

Niels Hesseldahl
POSITION: Senior consultant
TOTAL ASSETS: €13.5bn
REAL ESTATE ALLOCATION:
10%

Sampension, the common management company for three Danish pension funds, only made one investment in 2008: a forward purchase of an office building in Bristol, UK, which will be delivered in July.

Before it invests more heavily it is looking for "more stabilisation" in the markets, as senior consultant Niels Hesseldahl reveals. "As long as we can still see falling values in all markets we will still be passive."

But the picture is complicated by the fact that the institution will need to reassess its investment strategy for all asset classes. "It is a job that we still need to do before we can go out and invest."

Some in the industry say that the current point in the cycle of many real estate markets represents an unprecedented buying opportunity, especially from those looking to take advantage of distressed sellers.

However, Hesseldahl  says: "So long as we believe the values will still fall, it will not be very wise for us to go out and invest."

It is more important for Sampension to see signs of a recovery before investing again, even it leaves the risk of missing the very bottom of the market. And the pension fund's long-term strategy of increasing the diversification of its portfolio is more important than market timing.

"We have already diversified our portfolio a lot during the last three or four years. We have been very active in investing indirectly and today we have invested in 24 funds. One fourth of it is in Asia, so we have already today a very good diversification," he explains.

VR PENSION FUND

Hannu Hokka
POSITION: Managing director
TOTAL ASSETS: €970m
REAL ESTATE ALLOCATION: 5%

The pension fund for Finnish transport company VR Group divested its real estate investments in 2007 and, as managing director Hannu Hokka reveals, "kept its fingers at bay" in 2008.

As the institution moves through 2009 it continues to scan the markets and indicators for signs of an ecomonic recovery before moving back in. Unfortunately, there has been very little in the way of positive indicators, despite government action and stimulus on both sides of the Atlantic "boding well".

Hokka stresses the importance of patience and the benefits of timing the market successfully. "We can't really be sure to get the bottom, but if we can get near the bottom that is better than nothing," he says. "I can take some pain by putting money into the market now and seeing it maybe diminishing in value a bit. But I need to be patient."

Hokka sees opportunities in the fund's domestic market, including "some offers on our table". He is also interested in "vulture funds", those managers that can take advantage of forthcoming market distress.

"We have already put some money into one of those [vulture funds] in the US, where the change should actually take place first," he says. "I don't know how many steps are we going to take there, but possibly we will consider some more."


VITAL FORSIKRING

Stein Berge Monsen
POSITION: Senior portfolio Manager
TOTAL ASSETS: €24bn
REAL ESTATE ALLOCATION: 17-18%

Vital Eiendom manages the real estate investments for Norway's largest privately owned life and pension insurance company, Vital Forsikring. It is one of the biggest real estate investors in the country, with €4bn-worth of directly held property assets in Norway and Sweden.

Stein Berge Monsen, senior portfolio manager at real estate arm Vital Eiendom, is uncertain about the domestic property market. Vital Eiendom is not looking to be too active domestically.

However, he sees today as a good time to begin committing capital to fund managers who can invest wisely in the UK. "If you look at [committing capital] in 2009 and start to invest in 2010 and 2011, the downside most be limited," Monsen says. "Some companies and funds are looking at the UK, so that must be close to the bottom."

Monsen adds that the UK is arguably the most transparent and liquid market in Europe in general, and so the fact that is has repriced more than most other European markets makes it very attractive. "The rest of Europe is still a big question," Monsen adds.