<< First  < Prev   ...   2   3   4   5   6   Next >  Last >> 
  • Tuesday, November 04, 2014 12:58 PM | Deleted user

    New study finds:


    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 | Deleted user

    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

  • Tuesday, June 10, 2014 1:09 PM | Deleted user


    Diversification cited as key benefit but confusion remains around what constitutes an “alternative investment”, potentially slowing the pace of adoption

    Surveyed plan sponsors and institutional consultants represent more than $14 trillion in assets

    NEW YORK, (June 10, 2014) – Sponsors of defined contribution (DC) retirement plans see continued growth in the adoption of alternative investments in plan offerings, with real estate viewed as a fundamental asset class and an attractive avenue to portfolio diversification, according to the results of a new survey released today by the Defined Contribution Real Estate Council (DCREC). 

    These findings are based on in-depth interviews conducted with 401(k) plan sponsors, plan consultants, and target date fund managers that collectively represent more than $14 trillion in assets under management or advisement. While the majority of those queried expressed support for including alternative investments in DC plans, there remained some confusion as to just what constituted an “alternative,” the survey found. 

    “Real estate was valued for its ability to add diversification, with inflation protection and income viewed as significant but less important attributes,” said David Skinner, co-president of the Defined Contribution Real Estate Council. “At the same time, the survey also indicated that some debate remains as to how to define alternatives, including real estate, which may be slowing their inclusion in plans.” 

    Other findings from the survey include:

    • Low correlation was seen as the primary benefit of alternatives. This was followed by lower volatility, high risk/adjusted returns, and inflation protection. Income was viewed as least important.
    • Operational issues, including valuation and daily liquidity, remain an obstacle for some alternatives.
    • There is some openness to placing limits on quarterly contributions and withdrawals to alternatives, though challenges remain.
    Opportunity for direct real estate 
    All those surveyed had real estate in their plans in some form, with plan sponsors and consultants generally considering it one of the more straightforward options among alternatives. Nonetheless, some plan sponsors and consultants still showed reluctance to include the asset class among their core offerings due to slower adoption rates and perceived liquidity issues, especially with direct real estate.  

    Direct real estate is newer to the DC market, and was still perceived by some as having operational challenges, primarily around daily valuation and liquidity. In fact, the survey found that in some ways attitudes towards direct real estate and publicly-traded real estate investment trusts (REITs) were at opposite ends of the spectrum for many plan sponsors and consultants. Direct real estate was seen as having a low correlation to traditional assets, but lacking the liquidity and valuation of REITs. Concerns were also expressed over fees. REITs were viewed as offering liquidity and a longer history within DC plans. However, they were also thought of as too closely tied to the broader equity market, leading some of those surveyed to see these funds as more of a traditional asset than a distinct alternative.

    “Our findings suggest that there is a real opportunity to expand offerings of direct real estate in DC plans, and listed REITS as well,” said Skinner. “Plan sponsors and consultants clearly recognize the diversification benefits. The key is addressing ongoing concerns over valuation, liquidity, and cost. This goes to the heart of why DCREC was established – to provide the educational framework that will allow DC sponsors and their advisors to better understand the role of real estate in a retirement plan.”

    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 ARIS Advisors, Clarion Partners, Deutsche Asset & Wealth Management, Goldman Sachs, NAREIT, Principal Real Estate Investors, Prudential Real Estate Investors, Ten Capital Management, TIAA-CREF, and UBS Global Real Estate. Total membership has grown from 10 to 27 firms since its launch. 

    More information can found be at www.dcrec.org
  • Friday, May 30, 2014 1:15 PM | Deleted user

    The Defined Contribution Real Estate Counsel (DCREC) conducted research using APCO Insight to understand defined contribution (DC) retirement plan experts’ views of real estate (both private and public) investments in DC plans. 

    Read More

  • Wednesday, May 01, 2013 1:17 PM | Deleted user

    Leading Institutional Real Estate Managers form Council to educate defined contribution plan investors about real estate

    Defined Contribution Real Estate Council to focus on better retirement solutions for American workers through real estate investment

    NEW YORK, N.Y., May 1, 2013 

    As American workers continue searching for ways to boost their retirement income, a coalition of 10 global institutional real estate asset managers today announced the formation of a new trade group to help educate plan sponsors and consultants about ways in which investment in commercial real estate may enhance retirement security for defined contribution plans and their participants.

    The New York-based Defined Contribution Real Estate Council (DCREC) will serve as a resource for investors and plan sponsors who may be considering alternative investments options, such as real estate, through their existing portfolios.

    “We will learn from each other to the betterment of the entire market," said David Skinner, a principal with Prudential Real Estate Investors and co-president of the new group. “Whether in a public retirement fund or a private fund, real estate adds an important layer of diversification to the existing array of investment options which will help to reduce overall volatility.”

    “At the end of the day, our goal is to help plan sponsors and their participants achieve better investment outcomes through the use of institutional quality real estate solutions,” said Scott Brooks of Deutsche Asset & Wealth Management and DCREC co-president. "We are forming this council at a time when defined contribution plans are under increasing pressure to deliver improved outcomes for their participants." 

    Skinner and Brooks note that as traditional pension plans, or defined benefit plans, gave way to 401(k) plans and other similar defined contribution plans, investors and plan sponsors have failed to fully grasp the role commercial real estate can play as part of a balanced, long-term retirement savings portfolio.

    The idea for DCREC stemmed from a September 2011 conference led by Ben Adams, Founding Partner of Ten Capital Management. This group of global real estate asset managers gathered to discuss ways in which real estate investment could help the more than 85 percent of American workers, without a traditional pension, save enough money for retirement. 

    In addition to serving as a forum for best practices, ideas, strategies and data, DCREC plans to generate original research and educational offerings.

    “I tip my hat to the DCREC and its efforts to improve outcomes for the country’s workers,” said Charlie Ruffel, founder of PLANSPONSOR magazine and managing director of Kudu Advisors. “The defined contribution business is moving from a retail to an institutional business model and this group represents an important component of this trend. I believe the DCREC will serve as the focal point for this segment of the defined contribution business going forward.” 

    Founding members include Prudential Real Estate Investors, Deutsche Asset & Wealth Management, Goldman Sachs, Clarion Partners, Principal Real Estate Investors, Ten Capital Management, TIAA-CREF, ARIS Advisors, UBS Global Real Estate, and NAREIT.

    For more information, contact Mary Adams +1 201.445.7007

    www.dcrec.org info@dcrec.org 

    Source: Defined Contribution Real Estate Council

<< First  < Prev   ...   2   3   4   5   6   Next >  Last >> 

Copyright © 2018 DCREC                                215 E. Ridgewood Avenue, Suite 201, Ridgewood, NJ 07450   |   +1 201.445.7007    |     info@dcrec.org