What Pension Fund Investors Like About Real Estate

Despite diminished returns over the last 10 years, real estate is still the best “alternative asset class” available to pension fund investors, according to Geoffrey Dohrmann, chairman and CEO of Institutional Real Estate. “Today it’s not the giant that’s attracting the capital; it’s the midget,” he said. “It just happens to be the world’s tallest midget, and that’s why it’s getting capital.”

Dohrmann spoke to the Real Estate Professionals Club, led by students in the Evening and Weekend MBA Programs, on November 9 at Gleacher Center. Pension fund investors are looking to find properties without much capital yet, a strategy that creates unlimited job opportunities. Employers are looking for entrepreneurial self-starters who can find their own ways, he said. “They’re looking for somebody who can get the work done without a great deal of supervision, somebody who will take responsibility for their on-the-job training as they go along.”

Dohrmann saw myriad employment opportunities on the horizon in real estate because pension funds are being stretched as average life expectancy increases. Currently it’s 78 for males and 81 for females, and the Baby Boom generation is rapidly approaching retirement age. The idea to pay beneficiaries their pensions at age 65 has nothing to do with demographics, Dohrmann said. When German Otto von Bismarck created the first pension fund in the 1880s, the average male life expectancy was 48, he said. “Bismarck figured if somebody could live to age 65, they deserved a pension,” he said. “These pension systems were designed not to fund somebody’s retirement for 20 or 30 years, but for five to 10.”

—Phil Rockrohr