DCREC NEWS


<< First  < Prev   1   2   Next >  Last >> 
  • Thursday, December 01, 2016 6:52 AM | Anonymous member (Administrator)
    Finds that an allocation to real estate may help plan participants

    better navigate the critical Sequence of Returns issue 

    Holding public real estate early in the accumulation phase, and private real estate late can improve overall outcomes

    NEW YORK, (December 1, 2016) – A new study by the Defined Contribution Real Estate Council (DCREC) examining the impact of a mix of public and private real estate in defined contribution lifecycle funds found that the addition of the asset class helped reduce volatility, mitigate sequencing risk”, and improve overall outcomes, it was announced today.

    Sequencing risk looms large for plan participants in the late accumulation and early retirement phases of the investment lifecycle, generally between ages 55 and 75, as a result of the portfolio size effect (i.e. bigger portfolios equal bigger absolute gains and losses).  Our research shows that an allocation to a mix of public and private real estate can make it easier to successfully navigate this challenge primarily by reducing volatility through the accumulation phase, ultimately leading to better retirement outcomes,” said Brian Velky, DCREC Research & Content co-chair.

    The paper (Allocating to Real Estate Assets Across the Lifecycle: a Dynamic Approach), looked at three approaches to the challenge of asset allocation in DC plans through the lifecycle, considering the role of real estate across:

    • Deterministic asset allocation strategies (target date and balanced designs);
    • Dynamic asset allocation strategies (dynamic lifecycle funds); and,
    • Sub-allocation strategies (varying exposures to public and private real estate over time).

    It further confirmed the results from an earlier DCREC study that found that adding as little as 10 percent public and private real estate exposure can enhance the risk-return profile of a DC plan portfolio throughout the retirement lifecycle, improving the probability of successfully achieving desired retirement outcomes

    In the most recent study, the 10 percent allocation was held steady across various portfolio strategies, while the public/private weighting was adjusted For most of the portfolios examined, adding real estate had a neutral to positive impact on performance, but increased the likelihood of success, defined by the authors as the ability to replace 70 percent of a plan members pre-retirement real income for life. This was due primarily to the reduction of volatility throughout the lifecycle, which in turn contributed to reduced sequencing risk.

    In addition, the study found that managing the blend of public and private real estate over time might also have a positive impact on both terminal wealth and expected shortfall In this instance, the maximum benefit is likely to be achieved by overweighting exposure to public real estate early in the accumulation cycle as a source of diversified growth, and then moving towards greater exposure to private real estate late in the cycle for downside protection.

    Lack of pooling transfers risk

    The study notes that, in contrast to defined benefit (DB) plans, a key feature of DC plans is that sequence risk is transferred to plan participants, primarily by the lack of pooling of assets The authors point out that in a DB plan, the sponsor is responsible for setting aside sufficient resources to meet the needs of plan participants in retirement Participants dont have to concern themselves with sequencing risk, which is spread over the pool of participants over all stages of the retirement lifecycle. In a DC plan the sequence of returns can have a major impact, with low or negative returns late in the accumulation phase making it more difficult for the plan participant to meet his or her goals.   

    The sequencing of returns means that the behavior of participants is a key variable of the success or failure of a DC plan participant across the lifecycle,” said Cristina Hazday, DCREC research & content co-chair, who noted that timing strategies have generally delivered poor results for investors. “As such, we see a clear benefit to using real estate to deliver median outcomes that are similar to those of portfolios without exposure to the asset class, but with less volatility over time.”

    About the Defined Contribution Real Estate Council (DCREC)

    The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Members include 23 of the leading real estate investment firms, collectively managing more than $900 billion in total real estate assets

    ###

  • Monday, October 17, 2016 3:50 PM | Anonymous

    Daily valuation seen as a vital to further establishing real estate as a fundamental part of defined contribution plans

    NEW YORK, (October 17, 2016) – As part of its ongoing mission to advocate for the inclusion of real estate as an essential asset class within defined contribution (DC) plans, the Defined Contribution Real Estate Council (DCREC) announced the publication of 10 Key Principles Recommended for Daily Valuation of Private Real Estate Investments.

    “Our 10 Key Principles is designed to act as a guide for establishing a transparent and objective process for pricing real estate assets on a day-to-day basis,” said Michael O’Connor at DCREC. “We believe that the ability to provide daily valuation of private real estate assets held in a portfolio is one of the keys to expanding the use of real estate in DC plans. Valuation is linked to liquidity, and that’s an important concern of plan sponsors and participants.”

    This publication offers guidance on topics including:

    • Understanding currently accepted methods of daily valuation and establishing an objective daily valuation process;
    • Incorporating third-party appraisals of individual assets;
    • Recognizing the impact of material events;
    • Establishing property-level debt valuation.   

    “Multiple DC plan sponsors in the market today have added private real estate to their plans and have a successful daily valuation process in place,” O’Connor said.  “Our publication identifies best practices and makes recommendations to those firms considering offering or evaluating this asset class.”

    The DCREC notes that its research has shown that incorporating real estate into a DC plan can improve outcomes for plan participants.  A survey conducted in 2015 by DCREC found approximately $18 billion in daily value real estate is already held within DC plans, with eight managers offering an existing product. Four others anticipated adding a DC-friendly real estate option in the near future.

  • Monday, September 19, 2016 2:47 PM | Anonymous member (Administrator)

    New site features added content and more links to industry resources

    NEW YORK, (September 19, 2016) – The Defined Contribution Real Estate Council (DCREC) today announced the launch of its new website designed to assist defined contribution (DC) plan sponsors, advisors and service providers seeking to learn more about the implementation of private and public real estate—including REITs—as an investment option within DC plans.

    The new site includes expanded content, research and links to industry resources. It provides access to DCREC’s proprietary industry research, links to its Podcast Series, information on best practice recommendations and a “checklist” for implementing real estate as part of a DC plan.  

    “Education is a key component of the DCREC mission,” said Alan Brown, DCREC’s co-chair of marketing and public relations.  “To that end, the new site is designed to provide an easy-to-access resource for the latest and most comprehensive information on the use of real estate in DC plans.”

    “We are pleased to offer this valuable resource to our members and the entire DC marketplace,” Brown added.

    About the Defined Contribution Real Estate Council (DCREC)

    The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Members include 26 of the leading real estate investment firms and service providers, collectively managing more than $900 billion in total real estate assets. 

    More information can found be at www.dcrec.org  

    ###


  • Tuesday, July 05, 2016 4:46 AM | Anonymous

    DCREC also releases 10 key principles recommended for daily valuation of private real estate investments

    NEW YORK, (July 5, 2016) –The first-ever "checklist" for defined contribution (DC) plan sponsors and consultants considering the addition of private real estate as an investment option in DC plans was announced today by the Defined Contribution Real Estate Council (DCREC)—a membership organization dedicated to advocating for the inclusion of real estate as an essential asset class in DC plan design and implementation.

    The checklist is an evaluation tool created to help plan sponsors and their partners in evaluating private real estate options that could be incorporated into their plan’s overall investment structure. The checklist incorporates a wide range of recommended questions on topics such as daily valuation, liquidity, investment strategy, product structure and investor eligibility, as well as the operational considerations involved in implementing private real estate strategies on existing record-keeping platforms.

    “Plan sponsors and their consultants continue to seek diversified portfolio options for their participants,” says Jackie Hawkey, who co-chairs DCREC’s Best Practices Committee. “Interest is growing in allocating to private real estate for uncorrelated diversification, often within customized target date funds or as part of a multi-asset class portfolio.”

    “The purpose of this checklist is to give market participants a standard set of questions to ask product providers when considering adding the asset class,” she adds. “This will make it easier to assess and compare offerings to determine the best fit for a particular plan.”

    A recent survey conducted by DCREC found that approximately $18 billion in daily value real estate is already held within DC plans, with eight managers offering an existing product. Four others anticipate adding a DC-friendly real estate option in the near future.

    “Incorporating real estate into a portfolio can improve outcomes and ultimately benefit DC participants,” says Michael O’Connor, co-chair of DCREC’s Best Practices Committee. “Our goal is to make the process of including it as straight-forward as possible for plan sponsors.”

    DCREC Also Publishes Recommended Guide for Private Real Estate Valuations

    Additionally, DCREC released Ten Key Principles Recommended for Daily Valuation of Private Real Estate Investments. This guide to understanding best practices in valuation covers topics such as incorporating third-party appraisals, establishing an objective daily valuation process, recognizing the impact of material events, and using currently accepted methods for daily valuation.

    “Daily valuation and liquidity are seen as two of the biggest areas of focus for DC sponsors who want to add private real estate as an investment option in their plans,” Hawkey said. “Together, our checklist and guide provide an excellent starting point for anyone hoping to learn more about how they can incorporate this important asset class into a DC platform.”

    About the Defined Contribution Real Estate Council (DCREC)

    The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Members include 26 of the leading real estate investment firms, collectively managing more than $900 billion in total real estate assets. 

    More information can found be at www.dcrec.org  

  • Tuesday, March 22, 2016 4:44 AM | Anonymous

    DCREC SURVEY OF REAL ESTATE INVESTMENT MANAGERS FINDS $18 BILLION AND ACCELERATING GROWTH IN DAILY VALUED PRIVATE REAL ESTATE HELD IN DEFINED CONTRIBUTION PLANS

    Eight managers have DC-friendly products in the market, four others launching private real estate options in the near future NEW YORK, (March 22, 2016) – In a survey of 14 investment managers that collectively have more than $2.5 trillion in assets under management, the Defined Contribution Real Estate Council (DCREC) found growing interest in offering private, commercial real estate investment strategies to defined contribution (DC) plan sponsors, with eight managers having at least one product in the market, and four others anticipating launching such private real estate strategies in the near future.

    Daily valued private real estate funds managed by the eight responding firms have now grown to $32 billion, with more than$18 billion attributable to defined contribution. Of the $18 billion, approximately 11 percent was allocated to public REITs, and 4.6 percent was allocated to other liquid assets, the survey found. “Typically, these strategies allocate 75-85% to private real estate and 15- 25% to real estate securities and cash to provide the requisite operational liquidity to DC Plans,” said John Payne, DCREC Co-President.

    The DCREC survey was completed in the second quarter of 2015. The Council anticipates using this initial survey as a baseline and will conduct the survey on an annual basis going forward.

    “The goal of the survey is to give plan sponsors, consultants, and target date fund glide path managers access to information on the depth and breadth of available, DC-friendly investment strategies offering access to private, commercial real estate,” Payne said. “Defined Benefit plans have long capitalized on the diversification benefits of private real estate allocations, and with this survey, we can better understand the magnitude of interest in the DC system and measure the pace of growth going forward.”

    “Based on the survey data, DC plan sponsors and consultants can now have confidence that this market has credible scale backed by multiple, competitive offerings that have been successfully implemented,” Payne added. “DC plan fiduciaries considering adding real estate as a diversifying asset class within the rapidly growing segment of professionally managed DC solutions can do so knowing that the market will support them.”

     Survey results are available on the DCREC website under research: www.dcrec.org/research

    About the Defined Contribution Real Estate Council (DCREC) The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Members include many of the leading providers of real estate investment products to the defined contribution marketplace. Total membership has grown from 10 to 26 firms since its launch.

    More information can found be at www.dcrec.org

  • Monday, January 04, 2016 12:41 PM | Anonymous

    DEFINED CONTRIBUTION REAL ESTATE COUNCIL NAMES NEW OFFICERS 

    NEW YORK, (January 4, 2016) – The Defined Contribution Real Estate Council (DCREC), a leading advocacy group promoting the inclusion of direct commercial real estate and real estate securities as a way to improve defined contribution retirement plan outcomes, has named three new officers to its leadership team, it was announced today.  

    John Payne, a senior vice president at Heitman in the client service and marketing group and the leader of the company’s defined contribution practice, has been named co-president, joining John Ehli of Deutsche Asset & Wealth Management in that role. He replaces outgoing co-president Laurie Tillinghast of UBS Global Real Estate. C. Allan Swaringen, president and chief executive officer president of JLL Income Property Trust, now serves as co-treasurer of the organization, alongside Jennifer Perkins of Principal Real Estate Investors. Swaringen replaces Kurt Walten of NAREIT. Jason Frederick, a portfolio manager at Principal Real Estate Investors, has been named co-secretary, serving alongside Lennine Occhino of Mayer Brown. Jason replaces Kevin Ryan of Cornerstone Real Estate Advisers. The DCREC membership thanks the outgoing leadership team members for their contributions to the organization’s success during their terms. 

    All appointments are for a period of two years and are effective January 1, 2016.

    “We’re delighted to welcome these three highly accomplished industry professionals to the DCREC team as our organization continues to grow,” said Ehli. “We also look forward to their support in continuing our mission of providing education and the promulgation of best practices for use of real estate in defined contribution plans.”

    About the Defined Contribution Real Estate Council (DCREC)

    The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Members include many of the leading providers of real estate investment products to the defined contribution marketplace. Total membership has grown from 10 to 26 firms since its launch. 

    More information can found be at www.dcrec.org

  • Friday, December 18, 2015 12:51 PM | Anonymous

    Yesterday the National Council of Real Estate Investment Fiduciaries (NCREIF) launched the first daily price index for private real estate (NCREIF Fund Index-Daily Priced (NFI-DP), and announced the index performance for the month of July.

    Commenting on the launch, John Ehli, co-president of the Defined Contribution Real Estate Council, said, “The introduction of this daily pricing index represents a major step forward in supporting the adoption of private real estate in defined contribution plans.  DC plan sponsors who want to include a private real estate option in their plans have found the issue of daily pricing and liquidity to be a challenge.  With the launch of the NCREIF Index, they will now have a window into the daily price movements for this asset class, as well as a tool for better understanding the overall performance and valuation of the positions held by their plans.”

    Ehli noted that DCREC continues to see growing sponsor interest in both private and public real estate as options in DC plans.  “We believe the availability of this index will encourage more sponsors to take a look at including private real estate in their DC plans,” Ehli said.

    Going forward, NCREIF plans to publish the index on a monthly basis. 

    The DCREC was created to support the use of real estate in defined contribution plans through education, research, and an emphasis on best practices.  If you’d like to speak with John about the significance of the launch of the NCREIF index, I’d be happy to arrange a conversation.

    Mike MacMillan
    212.473.4442
    Mike@macmillancom.com


  • Tuesday, March 10, 2015 12:53 PM | Anonymous

    DEFINED CONTRIBUTION REAL ESTATE COUNCIL NAMES JOHN P. EHLI CO-PRESIDENT, JENNIFER PERKINS CO-TREASURER

    NEW YORK, (March 10, 2015) – John P. Ehli has been named co-president of the Defined Contribution Real Estate Council (DCREC), and Jennifer Perkins, has been named co-treasurer, it was announced today.  


    Ehli, who is a portfolio manager for Deutsche Bank’s RREEF Real Estate core commingled fund, RREEF America REIT II, joins UBS Reality’s head of DC strategy, Laurie Tillinghast, who was appointed in 2014, as co-president. He replaces David Skinner, Defined Contribution Practice Leader at Prudential Real Estate Investors and a co-president since 2013, whose term expired. Perkins, a portfolio manager for the Principal U.S. Property Account at Principal Real Estate Investors, will share her responsibilities as treasurer with Kurt Walten, Senior Vice President, Investment Affairs & Investor Education at NAREIT. She replaces Benjamin Adams, Founder & CEO of Ten Capital Management who served as co-treasurer since 2013 and whose term has also expired.

    “Saving, planning, and investing for retirement remains a major challenge for many Americans,” said Ehli. “I’m very excited to have the opportunity to further support the work done by DCREC to advance the understanding of the role that real estate should play in defined contribution retirement plans.”

    Perkins said, “Since launching the council in 2012, we have seen tremendous growth in our membership as more and more firms look to communicate the benefits of using real estate in defined contribution plans. I look forward to working with the members and with others across the industry to support our research mission.” 

    The Defined Contribution Real Estate Council was established to promote the inclusion of both direct commercial real estate and real estate securities, including REITs, in defined contribution plans. As part of its educational mission, the organization has funded significant studies looking at the role real estate can play in DC plans. Most recently, DCREC published A Path to Better Retirement Outcomes: Allocating Real Estate Assets to Retirement Portfolios, an academic study that found that an allocation of as little as 10 percent to a mix of listed and unlisted real estate could enhance the risk-return profile of a defined contribution (DC) plan portfolio and improve the probability of successfully achieving desired retirement outcomes. This followed an earlier DCREC-sponsored survey of plan sponsors and consultants that found broad-based support for the growing use of alternatives, particularly real estate, in DC plans.

    “We’re delighted to add John and Jennifer’s expertise to the executive team at DCREC,” said Tillinghast. “We look forward to their contributions as we continue to engage the DC community in the discussion of the role real estate can play in contributing to achieving successful retirement savings outcomes.”

    About the Defined Contribution Real Estate Council (DCREC) 

    The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Founding members include many of the leading providers of real estate investment products to the defined contribution marketplace. Total membership has grown from 10 to 28 firms since its launch. 

    More information can found be at www.dcrec.org


  • Tuesday, November 04, 2014 12:58 PM | Anonymous

    New study finds:

    ADDING REAL ESTATE EXPOSURE TO DEFINED CONTRIBUTION PLANS ENHANCED THE RISK-RETURN PROFILE, DAMPENED VOLATILITY & IMPROVED OUTCOMES FOR PARTICIPANTS

    A 10 percent mix of listed and unlisted real estate would have improved retirement outcomes for plan participants and provided a smoother path to success 

    NEW YORK, (November 4, 2014)– An allocation of as little as 10 percent to a mix of listed and unlisted real estate enhanced the risk-return profile of a defined contribution (DC) plan portfolio, improving the probability of successfully achieving desired retirement outcomes, according to the results of a new study released today by the Defined Contribution Real Estate Council (DCREC).

    The study, A Path to Better Retirement Outcomes: Allocating Real Estate Assets to Retirement Portfolios, was conducted by Michael E. Drew, PhD, a Professor of Finance at the Griffith Business School at Griffith University, Adam N. Walk, PhD, also from the Griffith Business School, and Jason M. West from Bond University.

    The study determined that the sequence of portfolio returns plays a critical role in the ability of DC plan participants to achieve their retirement savings goals, and this is particularly important late in the accumulation phase and early in the transition to retirement. Further, a portfolio strategy that includes real estate could deliver a smoother transition, improving long-term participant outcomes, and helping DC investors avoid adverse responses to temporary market setbacks example, switching out of risky assets and moving out of the market altogether after a significant downturn. This gradual transition increases the likelihood that participants will ‘stay the course’ and achieve their goals.

    In the study covering the period from January 1976 to January 2014, the authors examined historical DC-style asset allocations, including target date and target risk funds, and added a 10 percent allocation to real estate for their research. The simulated portfolios ranged from 100 percent stocks to a 60/40 stock/bond blend, and included well-known established target date and target risk glidepaths. The real estate allocation was made up of a 50/50 blend of listed and unlisted real estate. For the portfolio simulations including a real estate allocation, the exposure to real estate was taken equally from the stock and bond portions of the portfolio.

    Based on these simulations, the authors concluded that the portfolios: 

    • Achieved similar expected outcomes and in some cases better results when compared to portfolios without an allocation to real estate;
    • Did so with better tail risk characteristics; and,
    • Achieved success to a similar extent as their non-real estate alternative portfolios, but with a smoother path to the end goal. 
    The study notes that listed real estate, represented by REITs, has often played a role in DC portfolios as REITs provide an easily implemented exposure to the asset class due to their liquidity, generally diverse holdings, and valuation cycles that mirror stocks and bonds. Plan sponsors have been slower to adopt unlisted real estate. The authors point out that unlisted core real estate has a number of characteristics that should make it attractive to plan sponsors as well, including returns closer to that of bonds but with significantly lower (reported) risk than stocks, regular income (making it a reasonable bond substitute), low (reported) volatility and low correlation to listed markets. 

    In addition, some types of unlisted real estate have demonstrated inflation hedging characteristics, potentially making the asset class a reasonable defensive asset from the perspective of a liability-driven investor.

    “Given the myriad of retirement risks faced by plan participants – market returns, inflation, taxes, and interest rates, to name but a few – the diversifying characteristics of both listed and unlisted real estate may provide an opportunity to improve portfolio efficiency and retirement outcomes,” said Professor Drew. “With the prominent role real estate plays globally in retirement plans, we believe the time is right for US-based plan sponsors to re-think how they provide exposure to this asset class in defined contribution programs.”

    About the Defined Contribution Real Estate Council (DCREC) The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

    Founding members include many of the leading providers of real estate investment products to the defined contribution marketplace. Total membership has grown from 10 to 28 firms since its launch.

    More information can found be at www.dcrec.org

    ###

    Author Statement and Acknowledgements
    This research was supported by DCREC. The authors greatly benefited in this work by discussions with: David Skinner (Co-President, DCREC); Jason Frederick and Ian Matthew (Co-Chairs, DCREC Research & Content Committee) and Committee Members; and Mary Adams (DCREC Executive Director). The views expressed herein are those of the authors and are not necessarily those of DCREC.
  • Wednesday, October 01, 2014 1:04 PM | Anonymous

    Defined Contribution plans could have benefited from adding real estate to their portfolios, achieving similar performance and in some cases better results when compared to portfolios without real estate, while avoiding some of the pitfalls experienced by plan participants during serious market disruptions. Even a modest 10% allocation to listed and unlisted real estate can produce a stabilizing effect, according to the recent study. 

    Read More

<< First  < Prev   1   2   Next >  Last >> 

Copyright © 2017 DCREC                                215 E. Ridgewood Avenue, Suite 201, Ridgewood, NJ 07450   |   +1 201.445.7007    |     info@dcrec.org