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Pension funds are like grizzly bears: immensely powerful but only looking for prey within easy reach. However, when local foraging becomes increasingly difficult, they look further afield.
Some have been doing this for years. The Dutch economy is too small to support its giant pension fund market while the Germans suffer from low yields in their home bond markets, so both countries' pensions funds have sought diversification in European commercial real estate. Now they are beginning to face competition from the US and UK.
North American funds rarely buy foreign real estate - soaring equity values in the last few years have distorted risk profiles, leaving real estate at less than 4 per cent of portfolios on average.
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