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Own Real Estate Funds? 8 Questions to Ask

For over a decade, direct real estate has gained an increased presence in the portfolios of Canadian pension funds. After the Great Financial Crisis, real estate allocations have increased further for many sponsors as they continue to search for higher returns and benefits to diversification in the current economic environment. Larger public pension funds have the in-house expertise to make the careful investment decisions to maximize returns as well as the size and scale to enter into transactions that may be accretive to their overall portfolios. Small pension funds, on the other hand, do not have these resources and thus face a different set of issues that require a different approach.

Smaller pension funds are more reliant on external fund managers and a closed-end limited partnership with a value-add investment style is often used to access direct real estate. Understanding some of the basic issues surrounding this particular type of fund structure and investment style will help pension fund investors more effectively monitor their advisors. Meetings typically take place on a quarterly basis, and it is during this time that an institutional investor can ask the incisive questions necessary to hold their advisors to account and ensure that the fiduciary duty to beneficiaries is truly upheld.

 

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