Pension funds play catch-up with high rise of real estate

Pension funds play catch-up with high rise of real estate

After several years of robust performance and enviable returns, public and private pension funds are hitching their bandwagon to the bull-run real estate market. Time will tell if their rearview-mirror investment strategies are too late.

“The pension fund universe was underfunded in recent years,” says Gary Koster, leader of investment funds services at Ernst & Young and a real estate market watcher. “According to classic portfolio theory, real estate should be part of any investor’s asset allocation strategy. Real estate should be about 6% to 7% of a portfolio. For pension funds as a whole, it’s at about 3.5.”