UK pension funds continue to bet on property - report

UK pension funds are keeping faith with the commercial property sector despite the market turbulence, according to a new report released by global real estate investment manager Prupim. The research conducted by Prupim in cooperation with the Pensions Management Institute (PMI) indicates that 25% of UK pension funds are planning to increase their asset allocation to commercial property and over 50% will maintain their current allocation over the medium term.

The report entitled 'Real Estate Investment: What's on the Horizon' was presented at the PMI Autumn Conference on Tuesday. The study says pension funds still value the diversification and the relatively steady and occasionally high returns that real estate can offer as an asset class.

Professor Paul McNamara, head of research at Prupim said in a statement: 'Given the difficult times in the commercial property market over the past year, this is a welcome vote of confidence from institutional investors. These findings confirm the long sighted nature of pension schemes as investors and it is reassuring to find that pension fund managers and trustees still see opportunities in both the UK and overseas commercial real estate markets over the next three years.'

The research also revealed that unlike their typically core, core-plus approach to UK property investment, when investing overseas many pension funds move up the risk spectrum and seek out value-added and opportunistic investment returns. Almost 50% of pension funds surveyed who have invested in real estate now have exposure to real estate markets outside the UK. This represents something of a sea-change taking place over the last decade for the asset class. The report also confirmed that Europe is by far the preferred region for such investors.