UK - More than one-third of UK pension funds with existing real estate investments are actively looking to increase their exposure, while a small number remain unsure about the asset class, according to a survey by Aberdeen Asset Management.
Close to two-thirds of the 166 pension schemes questioned by the investment management company already had an exposure to property.
Of those, 36% said they would possibly increase their weighting, while just over half (57%) said they would maintain their current exposure.
More than one-third (35%) of funds with no existing real estate exposure said they were actively considering allocating to the asset class.
Andrew Smith, recently appointed group head of property at Aberdeen, said the results were not surprising given ongoing requirements for pension fund investors to diversify their equity and fixed income investments.
However, survey respondents currently avoiding property cited the asset class's lack of liquidity and the perceived risks of investing in real estate.
Smith said property was attractive as an inflation hedge given the possibility of inflation picking up in the medium term.
"However," he added, "the industry needs to communicate with investors to address their concerns, particularly about liquidity and the perceived risks associated with property investment."
He also pointed to the recovery in the UK property market, where strong investment demand continued to "drive a rise in capital values", as having a positive effect on the perceptions of UK pension funds.
"A pronounced lack of new development is also helping London office rental values to stabilise more quickly than in previous economic downturns," he said.
"Although UK property yields have fallen over the past six months, property's yield premium against cash, nominal and real government bonds is above its 15-year average and looks attractive from an income perspective."
