The Association of Real Estate Funds (AREF), the trade body for investors in real estate with £50 bn (€57 bn) in member assets, has urged the UK government to remove barriers and impediments to investments in productive assets by defined contribution pension funds.
AREF has put forward five proposals, one of which is to encourage or mandate DC platforms to hold non-daily-traded assets. 'The persistent problem of platforms being unwilling to offer DC funds access to illiquid assets must be solved,' it said.
Other ideas involve gettimg smaller DC funds to merge to create funds with scale and the ability to invest in large real assets, moving them from an individual account model to a collective DC model, and addressing the 'correct gatekeepers' and incentivise them to take managed risk.
'Focus must be placed on the investment consultants and the in-house teams of the very large DC schemes – and not the underlying pension savers, most of whom invest through default funds,' said AREF.
In the first place, it wants to see the current universe of daily-traded commercial real estate funds maintained. 'These funds provide daily liquidity for the majority of the time through holding relatively high levels of cash, with rare suspensions under extreme market conditions. They should not have longer notice periods imposed until other avenues have been opened for DC funds.'
Paul Richards, MD at AREF, said: 'The handbrake’s been left on regarding DC investment in illiquid assets – from housing to city centres – and the government can help to take it off.'
'Doing so will help redirect billions in defined contribution pension scheme savings into housing, levelling up and net zero projects. These are the great domestic issues of our time. We and our members are willing to help solve them – but we need a lot of change to enable us to wheel into action.'