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UK Pension Schemes and the Case for Global Real Estate

Last updated: 11 November 2011

 



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For many years, pension funds have exploited the diversification benefits of an allocation to real estate. In the UK, real estate now typically comprises 5% to 10% of a pension scheme's assets and tends to be invested almost exclusively within the domestic market.

 

The purpose of this paper is to highlight the merits of adopting a global approach and to consider the different ways of implementing such a portfolio.

 

As with equity investment, the key benefits to adopting a global approach to real estate investing are:

 

  • exposure to a broader opportunity set
  • less volatillity due to the diversification effect
  • a reduction in country and sector concentration

 

We believe that the rationale for overseas investment also holds true for real estate. As such, there is a strong case for considering a global approach to real estate in order to enhance returns and improve diversification.

 

 

 

Mercer is a leading global provider of investment consulting services, and offers customized guidance at every stage of the investment decision, risk management and investment monitoring process. We have been dedicated to meeting the needs of clients for more than 30 years, and we work with the fiduciaries of pension funds, foundations, endowments and other investors in some 35 countries. We assist with every aspect of institutional investing (and retail portfolios in some geographies), from strategy, structure and implementation to ongoing portfolio management. We create value through our commitment to thought leadership; world-class, independent research; and top-notch consultants with local expertise.

 

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Contact: Clare Abbam
Tel: +44 (0) 20 7178 3270

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