GLOBAL - US public pension funds are less likely to invest directly and significantly more likely to gain real estate exposure via listed companies than their European counterparts, according to data from private equity research firm Preqin.
Fewer than a quarter of US public pension funds have direct exposure to real estate - and those that have tend to be large state schemes.
By contrast, 48% of European pension schemes have direct allocations, with small and medium-sized schemes tending to focus on their domestic market.
US pension schemes tend to favour listed real estate, with 40% expressing an appetite for REITs, which they view as simultaneously inflation-hedging and liquid, compared with 17% of European public pension fund investors.
Real estate manager Andrew Moylan said: "The US REIT market is more established, and it's a traditional route for institutional investors. That isn't the case for European investors."
Private equity remains the primary route for investors in both the US and Europe to gain access to real estate markets.
Around 93% of US public pension funds allocate to private real estate, compared with 87% of their European counterparts.
Among US pension schemes, 81% target core vehicles, 64% target value-added friends, and 48% target opportunistic funds.
Among debt investors, 30% target distressed debt.
The average US public pension fund real estate allocation stands at 6.3%, below the 8% average target allocation.
"Not much has changed over the past year," Moylan said. "I wouldn't necessarily expect it to because of the long-term nature of these investors."
Small pension schemes make up the bulk of the US market, with 57% posting assets under management (AUM) below $1bn (€760m).
Only 5% of schemes recorded AUM above $50bn.
