Life Insurance and Pension Fund - Direct Investment in Real Estate

Introduction

The UK institutional investment market in real estate is relatively small and homogenous, and has become an industry where individual fund performance is widely monitored. The increasing availability and wider use of performance measures for real estate as well as fund performance, together with increasingly sophisticated research, has given rise to a greater appreciation of the performance characteristics of real estate investment1.

This chapter initially outlines the origins of life insurance and pension funds, and considers the reasons for their preference for long-term financial assets. It then proceeds to review the main characteristics of real estate as an investment, and the probable reasons for institutions' limited exposure to this asset class.

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1 In the UK the Investment Property Databank has provided a comprehensive performance measurement service for institutional investors, since 1986.