US pension funds hit by denominator effect but still look for RE opportunities

A number of US institutional investors are re-evaluating their real estate portfolios and strategies, with some finding they have become over-allocated to the asset class and others anticipating a ‘buying opportunity’, according to advisers.

“Right now we are all trying to figure out [the] short and long-term consequences for the real estate industry,” said Allison Yager, global leader for real estate at investment consultancy Mercer. “One thing we can assume is that last week’s value assumptions are no longer valid”.

Yager said different real estate markets and sectors would be affected to varying degrees, but “the values will all need to be readdressed” and a “greater risk premium” applied to “most assets at this point”.

Steep falls in stock markets will have automatically pushed up investors’ weightings to non-listed markets like private real estate.

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