Pension funds and private equity real estate: history, performance, pathologies, risks

Timothy J. Riddiough

Chapter 15 in Handbook of Real Estate and Macroeconomics, 2022, pp 371-412 from Edward Elgar Publishing

Abstract: I study the history and performance of commercial real estate (CRE) in the pension fund portfolio, showing that plan sponsors fundamentally changed their approach to CRE investment once underfunding gaps emerged in the early and middle 2000s. Several new empirical facts are presented, including pension fund share ownership estimates of private equity real estate (PERE) in excess of 50% and the apparent existence of an illiquidity price premium paid by pension funds for the "volatility veil" that PERE fund investment provides. Three types of concentration risks are identified, including high geographical ownership concentrations. The risks that pension funds pose to economic and financial stability have been exacerbated by the COVID-19 pandemic.

Keywords: Asian Studies; Economics and Finance; Urban and Regional Studies (search for similar items in EconPapers)
Date: 2022
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