The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence - new publication by Martin Hoesli and Louis Johner
Pension funds aim to hold assets that match their future liabilities. For this purpose, there is a growing interest in multi-family properties as their returns should be positively related to wage growth and hence pension liabilities.
Using data for Sweden over 145 years, GFRI's Professor Martin Hoesli, Ph.D. student Louis Johner and their co-author Jon Lekander from the Royal Institute of Technology in Stockholm, investigate the role that multi-family properties play in the context of a mixed-asset portfolio that aims to track wage growth.
The benefits from holding multi-family properties are the greatest for low-risk allocation approaches. For more risky strategies, the role of real estate is also positive but more muted, and it varies greatly over time. Holding real estate was most beneficial during the first two decades of the 21st century.
Multi-family properties are found to be the only asset class to be positively related to wage growth. The authors show that the net operating income acts as the transmission channel between wages and property returns.
The new study titled “The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence” has been accepted for publication in the Journal of Property Investment and Finance.Jul 17, 2023