"Checklist" Introduced to Help DC Plan Sponsors Considering Adding Private Real Estate Investment Options Into DC Plans

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  

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