Property investment results of Dutch pension funds (2004-2008): International diversification is disappointing Jan-Willem Dijkhuis Managing Director Lymos Real Estate Capital Advisors

Main questions for pension funds are Pension funds experiences 2004-2008 Main questions for pension funds are Does a international focused RE investment strategy generate higher returns and a lower risk profile Is a domestic investment approach a too high risk for pension funds

Pension funds experiences 2004-2008 Relevant Data 2004-2008   # Dutch Pension funds 30 AuM in real estate 2008 (€ bln) 58 Industry pension funds 19 Corporate pensionfunds 11 2004-2008 interesting period in terms of volatility The analyses is based on returns as published in annual reports of pension funds instead of using market data

Pension funds experiences 2004-2008 First question What have been the results of pension funds in real estate investing over the last five years Second question What can we learn form these findings

Higher risk has not led to higher returns over the years 2004-2008 The 15 low volatile funds have mainly invested in Dutch real estate The 15 high volatile funds have mainly constructed a Global real estate portfolio

The usefulness of international diversification. International diversification over the years 2004-2008 has not led to a lower risk profile  Period 2004-2008 Return Risk Pension funds that mainly (>50%) invest in the Netherlands 7.9% 5.9% Pension funds that mainly (>50%) invest internationally 6.7% 19.3% But from the above it is not possible to conclude that international diversification does not work.

The usefulness of international diversification.

The usefulness of international diversification. A comparison between risk return profile of pension funds and benchmarks

Final Observations over the years 2004-2008 Risk return profile of pension funds that invested mainly internationally in has been less favorable compared to pension funds that invested mainly in the Netherlands Risk return profile of pension funds that invested mainly internationally in has been less favorable than might be expected on the basis of the global index.  Implementation problem? Further research is needed