Publica, Switzerland’s largest public pension fund, is to begin investing in global real estate next year. The CHF37bn (€34.1bn) [corrected] institution, which manages 20 pension plans, will begin by investing in core open-ended funds in North America and Asia, according to portfolio manager and strategist David Engel.
Engel told IPE Real Estate that Publica has established a 4% allocation to foreign real estate, in addition to its existing domestic portfolio made up of direct investments. Publica intends to invest mainly in core assets, but will accept up to 10% of its allocation being in value-added investments, he said.
It will initially concentrate on open-ended funds with broad investor bases. The next step would be to act as a sole investor in a segregated mandate or also alongside larger investors in co-investment vehicles.
It plans to be open to investing across a range of structures, but will take its time to “grow into the market”, Engel said. “In a final phase we would maybe consider closed-end funds, club deals or joint ventures.”
Geographically half of the pension fund’s foreign real estate allocation is for North America, with 30% reserved for Europe and the remainder for Asia. “Asia has high growth potential, but few established products,” said Engel.
“There’s a lot happening there though, so if at some point in the future we were to go further into foreign real estate that could very well happen in Asia – although it’s much too early to say now.” The rolling out of its strategy is roughly split into two phases, the first being to build a broad diversified foundation of holdings in North America and Asia via investment in core open-ended funds.
This would complement Publica’s portfolio of Swiss assets, which will count towards the pension fund’s Europe allocation, according to Engel.
The second phase would see the pension fund award segregated mandates with a specific strategic focuses.