Pension fund investment in commercial real estate: a qualitative analysis of decision-making and investment practices in Brazil

Existing research has shown that pension funds have been adopting financialized real estate governance models and investment practices more concerned with the short-term risk-return performance of the portfolio. This study of the property portfolios of Brazil's largest pension funds shows that financialization is a powerful force but does not fully explain pension fund commercial real estate investment and management practices which are strongly predicated upon three guiding principles: (1) an awareness of the constraints posed by pension liabilities; (2) a focus on asset-specific competences to increase returns; and (3) a prioritization of in-house investment management. These practices are, however, challenged by a recent Monetary Board decision to ban direct property investment by pension funds and place their resources at the disposal of the financial industry.