UK – Chris Hitchen, chief executive of the £15.5bn (€23bn) Railways Pension Trustee Co., Railpen, says that pension schemes’ shift to fixed income was an “overreaction”.

“I think the orthodoxy now is to view pension liabilities as bond-like so you’ve got a negative bond on your balance sheets and to actually increase your weight into equities is looking increasingly unorthodox,” Hitchen says in an interview with IPE Real Estate.

“Having said that, we always felt that the headlong flight to bonds was an over-reaction and certainly at these yields we’re looking to resist it.”

Hitchen, who is also chairman of the National Association of Pension Funds’ Investment Council, said the scheme regards property as an important portfolio diversifier.

“Yield compression is occurring and I’m fairly realistic about what I expect going forwards by I don’t expect great things from the other asset classes either.”

Railpen has around £1bn in real estate, which is slightly under the target 7% weight due to scarce opportunities. He said the fund is a “couple of hundred million under-invested at present”. The weighting to real estate has risen from 5% a five or six years ago.

“We’ve been building it up since then gradually. The question is what speed do you do that and I guess we try to make haste slowly.”

For the full interview, please see the September/October edition of IPE Real Estate.

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