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Pension funds and private equity real estate: history, performance, pathologies, risks

In: Handbook of Real Estate and Macroeconomics

Author

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  • Timothy J. Riddiough

Abstract

I study the history and performance of commercial real estate (CRE) in the pension fund portfolio, showing that plan sponsors fundamentally changed their approach to CRE investment once underfunding gaps emerged in the early and middle 2000s. Several new empirical facts are presented, including pension fund share ownership estimates of private equity real estate (PERE) in excess of 50% and the apparent existence of an illiquidity price premium paid by pension funds for the "volatility veil" that PERE fund investment provides. Three types of concentration risks are identified, including high geographical ownership concentrations. The risks that pension funds pose to economic and financial stability have been exacerbated by the COVID-19 pandemic.

Suggested Citation

  • Timothy J. Riddiough, 2022. "Pension funds and private equity real estate: history, performance, pathologies, risks," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 15, pages 371-412, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19335_15
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    Cited by:

    1. Joe Cho Yiu Ng & Charles Ka Yui Leung & Suikang Chen, 2024. "Corporate Real Estate Holding and Stock Returns: Testing Alternative Theories with International Listed Firms," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 74-102, January.

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