​Dutch pension funds consider effects of blockchain on real estate liquidity

Dutch pension funds are monitoring how blockchain technology could have implications for their investments in real estate.

A portfolio manager at Robeco said the technology could increase competition between institutional and private investors, offering the possibiltity to divide property investments into small pieces.

This development could come at the expense of the illiquidity premium, according to Jeroen van Oerle, portfolio manager of the Global Fintech Equities Fund.

Speaking at a Robeco meeting in Amsterdam about “tokenisation” of real assets, he referred to a $30m apartment complex in Manhattan that was sold to private investors through blockchain platform Ethereum last year.

Van Oerle warned that the illiquidity premium pension investors enjoy could evaporate, as the new group of investors did not require discounts.

“Private investors could easily divest their little piece of real estate through digital platforms such as Ethereum,” he said.

However, in Van Oerle’s opinion, blockchain also offered opportunities, as pension funds could, for example, place 25% of their property with private investors through tokenisation, and use the proceeds for new investments.

He further argued that tokenisation could enable schemes confronted with a sudden shortage of liquidity, to pay benefits or collateral for derivatives transactions.

According to the portfolio manager, who is a member of a working group of banks, asset managers and pension investors, tokenisation was already on the agenda of pension funds.

APG, the €482bn asset manager for large Dutch civil service scheme ABP, confirmed that it had attended “an exploratory meeting” on the issue.

It said that it monitored developments closely, but noted that they were at a very early stage.

“Much research must be done and a number of legal hurdles needs to be taken,” APG said.

The €135bn MN and €215bn PGGM said they were not represented in the working group.

PGGM said it was reluctant to sharing ownership with private investors and preferred to have full ownership in order to stay in control.

Its spokesman pointed out that it was entirely unclear who would call the shots in case the ownership of an object divided up across thousands of tokens.

He also noted that, in case of tokenisation, private investors would be at the mercy of project developers without governance.

“Divide and rule would be around the corner here,” he warned.

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