Firm Launches Real Estate Strategy for DC, DB Plans

The Retirement REdirect program offers defined contribution and defined benefit plans:

• Access to an institutional, fully integrated commercial real estate management platform with expertise in each of four quadrants;
• Benefits of direct real estate investment through the Principal U.S. Property Separate Account; and
• Potential to increase portfolio return per unit of risk, with the funds’ strategies meeting client needs of current income as a significant component of total return, diversification and inflation protection.

According to a new report commissioned by Principal Global Investors, the demand for real assets, namely commercial real estate, will continue to grow as defined contribution and defined benefit plans seek further diversification, protection from inflation and stronger risk-adjusted returns. Notably, rising interest in real assets was the most significant change in this year’s findings compared with those gathered in 2012.

“We’ve witnessed the discussion change from purchasing specific properties or securities to building a comprehensive allocation to commercial real estate investment alternatives,” said Pat Halter, CEO of Principal Real Estate Investors, headquartered in Des Moines, Iowa. “We believe both DC and DB plans can benefit from a dynamic allocation to the four quadrants of commercial real estate—public equity, private equity, public debt and private debt.”

Halter added: “Target-date and other asset allocation funds in the DC space are great candidates for diversified exposure to commercial real estate, as the majority of these types of funds rely on real estate investment trusts [REITs] as their sole real estate allocation. A broader set of commercial real estate alternatives could help increase diversification, manage volatility and provide alpha to investors.”