DB pension funds in U.K. to increase allocations to real estate finance development

Defined benefit (DB) pension funds in the United Kingdom are planning to increase allocations to real estate finance development as an asset class as they search for attractive yields and ways to meet their ESG goals, according to new research from investment manager Downing.

Its study of U.K. pension funds, which collectively control around £125.5 billion ($148 billion) in assets under management, found 86 percent expect DB schemes to increase allocations to real estate development finance as senior debt over the next three years.

Nearly one in five (18 percent) expect a dramatic increase in allocations, with DB schemes attracted by the opportunity of higher yields and the opportunity to meet ESG goals by funding social real estate or supporting the development of local residential property for instance.

Downing’s research found almost all (96 percent) of pension fund executives questioned agree real estate can play a crucial role in helping DB schemes with