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Intermediate1.5 hours18 terms

Cash Balance Plans & REI: Key Terminology

Explore key terms that might be helpful when considering cash balance pension plans for real estate investment. This curated collection clarifies commonly referenced concepts, offering a quick reference to terminology you may encounter. It's designed to support your learning, not provide exhaustive coverage.

Term Collection

1

Institutional Investor

An institutional investor is a large organization, such as a pension fund, mutual fund, insurance company, or endowment, that pools money to invest in various assets, including real estate.

Beginner2-3 min
2

Real Estate Investment Trust

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate, allowing individuals to invest in large-scale property portfolios through publicly traded shares.

Intermediate15-18 min
3

Real Estate Fund

A real estate fund is a pooled investment vehicle that allows multiple investors to combine their capital to invest in a portfolio of real estate properties or real estate-related assets, managed by professional fund managers.

Intermediate6 min
4

Liability-Driven Investment

Liability-Driven Investment (LDI) is an investment strategy primarily used by institutional investors, such as pension funds and insurance companies, to align their asset portfolios with their future liabilities. The core objective is to ensure sufficient assets are available to meet future obligations, typically by minimizing the sensitivity of the funding ratio to market fluctuations, especially interest rate changes.

Advanced8 min
5

Cash Balance Plan

A Cash Balance Plan is a type of defined benefit retirement plan that combines features of both traditional defined benefit and defined contribution plans, offering high contribution limits and significant tax deferral opportunities.

Intermediate8 min
6

Private Equity Real Estate

Private Equity Real Estate (PERE) involves institutional or high-net-worth investors pooling capital to acquire, develop, manage, and sell real estate assets, typically through a fund structure, with the goal of generating significant returns over a medium to long-term horizon.

Advanced8 min
7

Core Real Estate

Core real estate refers to low-risk, stabilized, income-generating properties in prime locations with high occupancy rates and strong credit tenants, offering predictable cash flow and moderate appreciation.

Intermediate5-6 min
8

Defined Benefit Plan

A Defined Benefit Plan is a type of employer-sponsored retirement plan that guarantees a specific payout at retirement, typically based on salary and years of service. For real estate investors, self-directed versions allow for significant tax-advantaged contributions to invest in real estate.

Intermediate5 min
9

ERISA

The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to protect individuals in these plans.

Advanced8-9 min
10

Liquidity Risk

Liquidity risk is the potential for an investor to be unable to sell an asset quickly enough to prevent a loss or to meet short-term financial obligations without significant price concessions.

Intermediate5-6 min
11

Limited Partnership

A business entity composed of at least one general partner (GP) who manages the business and assumes unlimited liability, and at least one limited partner (LP) who contributes capital but has limited liability and no management authority.

Intermediate14-18 min
12

Investment Policy Statement

An Investment Policy Statement (IPS) is a written document outlining an investor's investment objectives, risk tolerance, asset allocation strategy, and guidelines for managing their real estate portfolio.

Intermediate5-6 min
13

Fiduciary Duty

Fiduciary duty is a legal and ethical obligation for a professional to act in the best interest of their client, prioritizing the client's needs above their own with utmost loyalty, care, and disclosure.

Intermediate14-17 min
14

Pension Funding Status

A critical metric that assesses the financial health of a pension plan by comparing its current assets to its projected future liabilities, indicating its ability to meet long-term obligations.

Intermediate5 min
15

Asset Allocation

Asset allocation is an investment strategy that distributes capital across different asset classes, property types, and investment vehicles to manage risk and optimize returns according to an investor's financial goals and risk tolerance.

Intermediate5 min
16

Diversification

Diversification in real estate is the strategy of spreading investment capital across various assets, markets, or property types to reduce risk and enhance portfolio stability against market fluctuations.

Intermediate12-13 min
17

Unrelated Business Income Tax

Unrelated Business Income Tax (UBIT) is a tax levied on the net income of a tax-exempt organization, including certain real estate investment vehicles, derived from a trade or business regularly carried on and not substantially related to its exempt purpose.

Advanced7-9 min
18

Alternative Investments

Alternative investments are financial assets outside of traditional stocks, bonds, and cash, including real estate, private equity, and commodities, often used for diversification and higher return potential.

Intermediate5-6 min

Common Questions