Final salary end hits property investments: Axa

LONDON (Reuters) - Cuts to corporate pension funds are hitting real estate investments as traditional sources of business shrink, an Axa (AXAF.PA) executive told the Reuters Real Estate Summit said on Monday.

Steve Smith, head of transactions and asset management at AXA Real Estate Investment Management, said real estate investments are suffering from the switch from final salary pensions to less expensive defined contribution arrangements.

"The pension scheme business in not the force in the (real estate) part of the market it was," Smith said.

Defined benefit schemes, long-term investors that have steadily earmarked assets to property investments in the last few years, are closing to new entrants or are being discontinued altogether.

This trend, especially pronounced in the UK, has reduced final salary funds' investment power and their significance to real estate managers.

Although the global downturn, which has depressed real estate prices, is spurring some large pension schemes in the United States to look for bargains, Smith believes these investors will take their time.

"There are a lot American pension plans, who traditionally were opportunistic operators. Those would still be active but it really is not a big dynamic now," Smith said.

"If I had to characterize the mood it would be 'wait and see' at the moment for the majority," he said.

Defined benefit schemes guarantee a fixed percentage of the wages during retirement, no matter how the market fares -- the responsibility to plug the funding gap between schemes assets and liabilities rests with the plan sponsors.

"I think the nature of the pension fund market has changed radically with the demise of the final salary scheme you do not have the growth of these big schemes in the way it was in the past," Smith said.

(Editing by Andrew Macdonald)