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UK pension schemes looking to increase property exposure

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Over one third of UK pension schemes which already invest in property have indicated that they are actively looking to increase their exposure, according to a survey conducted by Aberdeen Asset Management.

Nearly two thirds of the 166 pension schemes questioned have exposure to property, 36 per cent of which said they would possibly be increasing their weighting, while 57 per cent said they would be maintaining their current exposure.

Of the schemes questioned that do not currently invest in property, 35 per cent said they were actively considering allocating to the asset class.
 
Andrew Smith, group head of property at Aberdeen, says: "Renewed interest in property as an asset class is not surprising as investors are increasingly looking to diversify their equity and fixed income exposure. The recovery of the UK property market continues, with strong investment demand continuing to drive a rise in capital values. A pronounced lack of new development is also helping London office rental values to stabilise more quickly than in previous economic downturns. Although UK property yields have fallen over the past six months, property’s yield premium against cash, nominal and real government bonds is above its 15 year average and looks attractive from an income perspective."
 
Those schemes that are not looking to invest in property cited the lack of liquidity and the perceived risks of investing in property among the reasons why they are not allocating to property.
 
Smith adds: “Property’s role as an inflation hedge is attractive given the possibility of inflation picking up in the medium term. However, the industry needs to communicate with investors to address their concerns, particularly about liquidity and the perceived risks associated with property investment.”

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