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  • 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. 

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  • 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. 

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  • 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

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