This article appears courtesy of Institutional Investor
Source: Global Money Management
European pension funds are set to increasingly use derivatives in their real estate portfolios as they become more aware of disadvantages to direct property, said Nick Tyrell, director of research at JPMorgan Asset Management’s European real estate team. Currently, real estate accounts for just 6.5% of the average pension fund portfolio in Europe, according to a recent JPMorgan study.
Low liquidity, tax inefficiency, high management costs and high exposure to asset risk are all disadvantages of investing in direct property or through a closed property fund that pension funds are well aware of.
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