Intermediated investment management in private markets: Evidence from pension fund investments in real estate

A. Andonov, P.M.A. Eichholtz, N. Kok*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

16 Citations (Web of Science)


We evaluate the economics of financial intermediation in alternative assets by investigating the allocation and performance of pension fund investments in real estate, the most significant alternative asset class for institutional investors. We document substantial heterogeneity in real estate investment cost and performance, determined by two main factors: mandate size and investment approach. Larger pension funds are more likely to invest in real estate internally, have lower costs, and higher net returns. Smaller pension funds invest primarily in direct real estate through external managers and fund-of-funds, and disregard listed property companies. Overall, we find that delegating real estate investment management to financial intermediaries increases costs and disproportionally reduces returns.
Original languageEnglish
Pages (from-to)73-103
Number of pages31
JournalJournal of Financial Markets
Publication statusPublished - 1 Jan 2015


  • Pension fund
  • Real estate
  • Delegated investment management
  • Economies of scale
  • Performance
  • RISK

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