GLOBAL - The Wellcome Trust will exercise extreme caution before making any new investments in real estate because of the unattractiveness of property relative to other asset classes and concerns about alignment of interest, according to its CIO Peter Pereira-Gray.

Speaking at the ULI Europe Trends conference in London  last week, Pereira-Gray said: "We have invested in relatively few private real estate funds because we have been more demanding and less keen to get the money out into the market," he said.

"We have learned some lessons in the area of alignment of interests; one issue we have found has been funds where a small investor with a small stake has a casting vote. We will have a very high bar indeed going back in [to real estate]."

The Wellcome Trust has its own real estate department but it does not have a strategic allocation to real estate. Investment opportunities in property have to compete continually with opportunities in other asset classes.

"Currently mega-cap equities provide returns in the mid-to-high teens and offer instant liquidity," continued Pereira-Gray. "Furthermore, the companies are well-managed and have some of the best governance in the world. That is my benchmark - don't show me anything that doesn't compete with that."

He said Wellcome Trust had looked at real estate-related transactions but it is unlikely that it would consider an asset in the UK for a while.

"You will see people buying into real estate again at the end of the year, mainly into core assets with comfortable returns," he said. "We want a bit more."

He added: "Some GPs with legacy issues will not recover as a result of so much cash going down the toilet."

The conference itself was notable for a broad diversity of views.

Speaking at the same event, Peter Hobbs, global head of real estate research at RREEF, suggested the market was witnessing a "tragic" missed opportunity in real estate.

"For new investors it is a fantastic time to be investing in real estate globally compared with two years ago, particularly in the US, but I fear investors will come back in 2011-12 after the best time has passed," said Hobbs. "Investors really need to be developing the strategy now and doing the due diligence later this year."

He continued: "It is a communication issue. Pension fund real estate specialists understand the opportunity but have difficulty communicating the case to the trustee boards who just see an asset class that has been through turbulent times. It's seen as a problem asset class rather than an opportunity asset class. More education is needed."

There will be sessions looking at alignment of interests and pension fund governance at this year's IPE Real Estate Investor Forum and Awards in Amsterdam on 28 May.