Time to diversify property investments

UK pension funds should take advantage of the expanding European property market and increasing use of real estate securities to diversify their property investments, according to Simon Males, Director of Institutional Funds at F&C Asset Management.

"Whilst many trustees of UK pension funds still appear very cautious about making allocations to foreign property, either directly or through real estate securities, now could be the time to consider it seriously" , said Males.

"UK property has produced some of the strongest returns among the EU nations and has a wide range of investment options available but as other markets increase their range of property products, investors are looking further afield both on performance and diversification grounds."

"Meanwhile, many funds have been expanding into Europe, where cross-border investment now exceeds domestic investment. It is much easier today for UK pension schemes to take advantage of potential growth opportunities in the rest of Europe as the whole property fund management industry becomes more globalised. This will help schemes not only to gain diversification benefits and obtain higher returns but also overcome the problems experienced by all property investors with the shortage of stock in prime locations" , added Males.

"Property markets tend to be lowly correlated with each other because they are highly reliant on local economic and market factors. This provides a greater scope for diversification than is possible in most other asset classes – something that all schemes investing in property should capitalise on" , concluded Males.