Pension funds in the US are increasingly pulling capital out of the country’s large open-ended property funds as return prospects diminish.
A number of funds have each received redemption requests this year totalling hundreds of millions of dollars, according to sources tracking the activity.
The JP Morgan Strategic Property Fund alone has received $1bn (€888m) in requests so far this year, while PRISA I, managed by PGIM Real Estate, has received $700m.
JP Morgan and PGIM Real Estate did not comment.
Other funds to have accumulated significant redemption requests year-to-date include UBS Trumbull Core Property Fund ($470m), Lion Property Fund ($416m), RREEF America REIT I ($357m) and Principal US Property Account ($337m).
US pension funds, whose capital forms the bedrock of the $194bn fund sector, are looking to redeploy capital after several years of strong returns for core US real estate, according to industry sources.
Annualised returns ranged from 12% to 13% between the first quarter of 2010 and the second quarter of 2016.
But this year they appear to be moderating. Annualised returns year-to-date have been approximately 4% and are projected to hit 8% for the whole of 2016.
A declining interest in US core open-ended funds has also been in the lack of investor searches this year.
Those pension fund seeking to redeem from the funds are typically looking to redeploy into higher yielding strategies, including value-add and opportunistic funds.
Annualised returns for value-add open-ended commingled funds are typically in the range of 12% to 18%.
But, industry sources say, the pension funds face the challenge of fewer investment options outside the core fund market.
As reported last week, US pension funds could also be looking to diversify their core exposure globally.
