IIJournals JPM-Special Real Estate Article Collection | Page 22

1990 through 2009. CEM provides information about
allocation, benchmarks, investment style and approach,
costs, and performance, both in absolute terms and relative to a self-declared benchmark.
Exhibit 1 provides more information about the
number of pension funds in the database. The exhibit
clearly shows that US and Canadian pension funds are
dominant in the database, with a combined total of 780
out of 884 funds. This has to do with CEM’s North
American roots and the fact that it started targeting
funds from Europe, Australia, and New Zealand at a
later stage. In Europe, the funds reporting to the database are quite large, with over US$23 billion in assets,
on average. With 5,406 total observations, the average
pension fund is in the database for about six years.

EXHIBIT 1
CEM Pension Fund Database

The asset allocation of the global pension fund
industry is dominated by the allocations to stocks
and bonds, but the importance of alternative assets is
increasing over time. In 2009, stocks, bonds, and cash
accounted for 47.1%, 36.9%, and 2.5% of pension fund
portfolios, respectively, while the remaining 13.5%
were invested in alternative assets. Real estate is the
most important alternative asset class, with an average
allocation of 5.1% in 2009, followed by private equity
(3.6%), hedge funds (2.9%), and other alternative assets
(1.8%).
Indeed, nowadays most pension funds invest in real
estate, in some form. The solid line in Exhibit 2 shows
the percentage of pension funds in the CEM database
that invest in real estate. This percentage is rather stable
and varies over time between 70% and 80%. Pension
funds in the United States are about as likely as the
global average to invest in real estate, but Canada’s funds
are clearly less likely to invest in real estate; in 2009,
only 60% did, compared to 75% of US funds that year.
Funds from Australia/New Zealand and especially from
Europe have a greater allocation to real estate: 95% of
the European pension funds reporting to CEM in 2009
invest in the asset class. This may partly be explained
by the fact that only the larger European pension funds
report to CEM.

EXHIBIT 2
Percentage of Pension Funds Investing in Real Estate (by region)

SPECIAL R EAL ESTATE ISSUE 2013

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