Pension Funds Are Buying REITs Hand Over Fist

If the thought of investing in the stock market scares you, you are not alone. The reality is that investing in the stock market carries risk, but when approached in a disciplined manner…

Pension funds are increasing their portfolio shares in REITs.

Since pension-backed institutional investors have so much money to throw around, the areas they are bullish may very well enjoy a tailwind from their buying.

We take a look at the sectors and REITs that pension funds turned bullish and bearish on over the last few years.

Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Learn More »

Pension funds have been increasing the portion of their investment portfolios invested in US real estate investment trusts (“REITs”) (VNQ) in recent years. And during the pandemic over the past few years, they repositioned their REIT sectoral weightings in a big way.

Before we discuss the moves that pension funds are making in REITdom, we should note a few general points about the kinds of investors’ pension funds are: Wake up with Wall Street BreakfastGet your daily take on the financial markets with Seeking Alpha’s flagship newsletter.Get for freeI agree to Terms of Use & Privacy Policy.

  1. Pension funds are slow-moving behemoths that tend to trade infrequently and make portfolio adjustments as little as possible;
  2. They are generally long-term buy-and-hold investors targeting steady total returns rather than quick pops of upside;
  3. Pension funds are risk-averse and would rather settle for lower yet reliable returns than take greater risk in pursuit of higher returns.

You might be thinking, “Why should I care what pension funds are doing?”

Consider this. The “2022 Pension Real Estate Association Intentions Survey” (“PREA“) found that though pension funds’ average target allocation to US REITs is 10.1%, the actual allocation to REITs stood at 8.9% at the end of 2021. Unsurprisingly, then, 61% of institutional investors expect their allocation to increase in 2022-2023.

That means huge sums of institutional investment money (likely billions) is going to flow into REITs in the next few years. This will act as a massive tailwind for the REITs and industry sectors that capture the most of those institutional dollars.

Of course, one should not invest in a REIT based merely on pension funds’ interest in that REIT. But observing what institutional investors are doing is useful to generate ideas as well as discerning emerging trends.

With that said, let’s look at where pension funds are investing in the world of REITs.

NASDAQ and NYSE quotes and data are delayed 15 minutes unless indicated otherwise. Market data and exchange information are provided for informational purposes only and is not intended for trading purposes. Neither 24/7 Market News Editors, 247 Market News, or data and content providers shall be liable for any errors or omissions, delays, misquotes or other market information relayed in any press materials. You should Use Realtime data to conduct due diligence before investing or trading, and trading in any stock is risky you could lose all your money.