Pension funds urged to invest more in listed property

Pension funds should invest more in listed real estate, according to JP Morgan property stocks analyst Harm Meijer. It is a 'myth' that direct property investment is always less risky, he added.

Meijer made the comments during a panel discussion at the annual Insight Amsterdam event held by the European Public Real Estate Association (EPRA) last week.

In response to a suggestion from the audience that de-listing of property stocks might be the preferred option due to the volatility of property stocks at times when the pension schemes' cover ratios are under pressure, Meijer said: ‘It is completely wrong (to think) that direct property is always less risky, or less volatile than indirect property. Everyone who has written something like that or thinks like that should do a proper study.'

Panellist Rogier Quirijns, head of European research at Cohen & Steers, said that research from the US going back over three cycles to 1973 showed that listed REITs there outperformed private real estate funds on an average of 400 bps every year.

‘In the long term REITs do behave in relation to the underlying real estate,’ he said. However, US REITS tend to have more conservative balance sheets and better capital structures compared to their Continental European and UK peers, he added. ‘As long as the balance sheets are in good shape there is still a great future for listed real estate,’ Quirijns said.

The volatility experienced by stocks, he added, also provided an opportunity to buy into property at levels that could never be achieved in the direct market.

Earlier EPRA CEO Philips Charls said that the association is continuing to press the case for listed property in Europe with big institutional pension and insurance investors worldwide. Further meetings in Asia are planned for March.