EUROPE - Pension funds no longer see private and listed real estate as an 'either/or' investment decision but are instead looking to combine the two approaches, according to EPRA chief executive Philip Charls.

Speaking at an Expo Real panel session on pubic and private approaches, he cited Dutch pension fund managers APG and PGGM, both of which combine public and private exposures within their real estate portfolios.

"Blended is the way to go," he said.

However, Charls acknowledged that some sizeable insurers - including the AUM €19bn Allianz Real Estate - had so far avoided investing in listed real estate.

"We're working on them," he said.

The potential for arbitrage - raised as a topic by IP Real Estate editor Richard Lowe, who moderated the panel - has emerged as one of the chief benefits of 'blending'.

Kiran Patel, CIO at Cordea Savills, said: "It allows investors to manage volatility in different investments with different durations. You'll get the characteristics of the underlying asset coming though, and they're not dependent on the structure overlaying it."

Duration as a differentiator was a point echoed by Knut Riesmeier, managing director of Dr Riesmeier Real Estate Capital.

He claimed investors based their decisions to opt for property equities or non-listed funds on how long they planned to have exposure.

"In distant markets, they may not want to invest in a long-term non-listed vehicle but instead use the market cycle and invest in a REIT that gives them access to the market, albeit with less control," he said.

"In more familiar markets, non-listed funds give them access to the fund manager, and they're closer to the investment. The approaches are complementary."

Less important for investors is the liquidity often associated with listed.

Patel said investors should not forget listed liquidity with a price.

"The stock market can adjust quickly so there's an element of the bid/offer spread in the price," he said.

INREV chief executive Matthias Thomas went further, suggesting liquidity had a negligible influence on pension funds opting for listed.

"The investors we're talking about just don't need it," he said. "They know property is illiquid. Liquidity is an irrelevant issue."

He also countered Charls's claim that listed was inherently more transparent because "it is regulated by banks, analysts and markets".

"At the fund level, there's an extreme degree of transparency between fund managers and investors because investors require it," he said.