UK – Pension funds should abandon oversupplied UK commercial for "bulges and pinch-points" created by population increases over the next three decades, an IPD conference on alternatives heard today.

Robert Houston, principal at St Bride's Managers, told the audience at a session on obsolete portfolio allocation: "Pension funds need to invest in what there is demand for now. We don't need office, retail and industrial. We have as much of that as we need, though not necessarily in the right place."

Citing an anticipated increase in the UK population from 62.3m to 73.2m by 2035, he urged investors to explore "cradle-to-grave" residential – from schools to care homes and crematoria.

Houston described residential as a "dead cert", adding: "We don't have enough, and we're not building quickly enough. We have 11m more people coming. We need all this stuff for all these people."

Andrew Appleyard, head of specialist funds-real estate at Aviva Investors, likewise forecast commercial shrinkage driven by technology and online retail, as the need to meet liabilities encouraged pension funds to look at alternative strategies.

"Diversification is the last investment free lunch," he said. "Pension funds want different strategies, and property alternatives will be one of them."

Successive speakers disagreed about who was to blame for pension funds' failure to invest in alternatives.

Houston blamed managers and advisers for what he described as a lack of joined-up thinking.

"We need a few more to specialist generalists," he said. "The knowledge is there. It just isn't being corralled."

Appleyard saw more traction than four years ago, with investors now willing to move from other asset classes into alternatives in search of income.

However, Paul Jayasingha, senior investment consultant at Towers Watson, warned that pension funds had been made cautious by lower-than-expected returns over the past five years.

"In many cases, property hasn't delivered," he said. "It isn't their best friend. We're having to fight to get into the room, then to convince them – even though, when we go through the examples, it's intuitive."