Defined Contribution Real Estate Council Publishes “10 Key Principles For Product Structure and Investor Eligibility”

Thursday, August 10, 2017 11:42 AM | Anonymous

(NEW YORK), Thursday, August 10, 2017 – The Defined Contribution Real Estate Council (DCREC), a leading advocacy group promoting the inclusion of direct commercial real estate and real estate securities as a way to improve define contribution (DC) retirement plan outcomes, has published "10 Key Principles for Product Structure and Investor Eligibility", it was announced today.  The new white paper is designed as a “best practices” guide for DC plan sponsors who want to add direct real estate to their DC plans.

            “These key principles are intended as a product structure road map for plan sponsors who want to add direct real estate to their offerings.   The direct real estate products available for DC plans seek to offer exposure to direct real estate through structures that are compatible with the needs of the DC market and record keeping systems, offer investor regulatory protections, transparency, and cost efficiency,” said Lennine Occhino, who co-chairs the Best Practices committee at DCREC.  “This represents another step forward in the process of institutionalizing the inclusion of real estate as an asset class in DC plans.”

            The recommended best practices paper covers a range of subjects, including:

  • Potential product structures, ranging from bank collective investment trusts to interval funds;
  • Building in strong investor protections;
  • Transparency and appropriate investor disclosures in plain English;
  • Defining investor eligibility based on the generally less liquid nature of direct real estate compared to other DC plan holdings; and,
  • Integrating direct real estate with other plan options to reduce illiquidity risk.

            Research sponsored by the DCREC has shown that adding an allocation to real estate can have a positive impact on retirement outcomes. At the same time, the number of plan sponsors offering direct real estate – and the number of investment products available to plan sponsors – continues to grow. 

            “We continue to see increased investment and growing interest in adding direct real estate to DC plans, often with the goal of bringing real estate’s diversification and income benefits to target date funds and other multi-asset retirement portfolios,”  added Michael O’Connor, co-chair of DCREC’s Best Practices Committee.   “The preparation of this latest white paper fits with our DCREC organizational goals of developing best practices for the inclusion of real estate as an asset class in retirement plans and improving participant outcomes.  We welcome industry feedback on this piece and other collaborative white papers that we have made available on our DCREC website.

About the Defined Contribution Real Estate Council (DCREC)

The Defined Contribution Real Estate Council was formed in 2012 to promote the inclusion of investments in direct commercial real estate and real estate securities, including REITs, within defined contribution plans. Its goal is to improve participant outcomes by furthering education about, advocacy for, and best practices of such investments.

Members include many of the leading providers of real estate investment products to the defined contribution marketplace. Total membership has grown from 10 to 27 firms since its launch.

More information can found be at www.dcrec.org.

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