The decision by institutional investors on how much of the overall portfolio to allocate to real estate, commercial and residential, is driven by a balance of quantitative analysis and qualitative judgement underpinned by bespoke long-term liabilities. The “optimal allocation” to real estate for pension funds and insurance companies — and the average allocation of the two investor types varies — is the subject of an enormous body of academic research, with literally as many answers as there are investors.

There is no intrinsic right or wrong answer as to what proportion of assets an institutional investor should allocate to real estate. Instead, the role of real estate tends to be driven by investors’ underlying liabilities.

For example, a pension fund with a younger demographic membership may justify a higher risk asset allocation weighted toward longer-term, capital-growth strategies, while a fund with a high proportion of older members would be wise to tar