Real estate can help DB schemes with de-risking

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The latest findings revealed that yields are the most common driver for these increasing allocations to real estate development finance, cited by 52 per cent of respondents

The vast majority (96 per cent) of pension scheme executives think that real estate can play a ‘crucial role’ in helping defined benefit (DB) schemes with de-risking, according to research from Downing.

The investment manager suggested that real estate development finance is ‘clearly moving up the agenda’, with previous research revealing that 86 per cent UK pension schemes expect investment in residential property development to increase over the next three years.

The latest findings revealed that yields are the most common driver for these increasing allocations to real estate development finance, cited by 52 per cent of respondents.

In addition to this, 50 per cent identified real estate development finance’s role in diversifying scheme portfolios as a key driver, while 48 per cent of suggested that support for environmental, social and governance (ESG) goals is driving increased allocations.

This is in line with previous findings from Downing, which showed that 86 per cent of UK pension schemes think an increasing focus on ESG considerations within property development could drive more institutional investment in this space.

The deteriorating performance of other asset classes, such as fixed income, has also made real estate a more attractive prospect, with over a third (34 per cent) suggesting that this is a key driver for increased allocations in real estate.

Commenting on the findings, Downing LLP partner and head of specialist lending, Parik Chandra, stated: Real estate development finance is clearly moving up the agenda for pension scheme managers.

He said: Forecasts of increased allocations underline its growing attraction to DB pension schemes which recognise a wide range of positive attributes it can deliver.

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