P&I at 30 - The difference-makers

Meyer Melnikoff

Meyer Melnikoff

Retired senior vice president and actuary, Prudential Insurance Co.

After a successful 10-year quest to win the right for insurance companies to invest in equities, Meyer Melnikoff, who was an actuary and pension executive at Prudential Insurance Co. of America, developed the Property Investment Separate Account, which single-handedly legitimized real estate as a pension fund investment asset class.

PRISA, Mr. Melnikoff told Pensions & Investments in a 1993 interview, was created to offer pension funds an investment that was not correlated with stocks and bonds. He thought that such diversification was especially important during periods of inflation, which was looming on the horizon in the late 1960s.

He began developing the pooled real estate fund in 1967, having gotten the idea from an article he read about the Pension Fund Property Unit Trust, a pooled fund for real estate investment managed for British pension funds. Prudential had rejected the real estate investment trust structure because its research indicated the market was saturated.

The fund was activated on July 31, 1970, after clearing regulatory hurdles. There were problems initially because the prolonged recession in the early '70s caused highly leveraged REITs to fail, casting a cloud on all real estate investment vehicles. Mr. Melnikoff had to spend a lot of time explaining that PRISA was different because it didn't create any debt and it limited its leverage to that resulting from buying mortgaged properties.

By 1973, PRISA was so successful that other insurance companies and some banks established real estate separate accounts and commingled funds.

"He was an early proponent of treating real estate as a core asset class in a pension plan portfolio," said Jacques N. Gordon, investment strategist, LaSalle Investment Management, Chicago "Back in the 1970s, when Meyer was head of Prudential Real Estate Investors, real estate was nothing. He was a farsighted early champion of putting real estate in with stocks and bonds to diversify a portfolio, to put in a long-lived asset to match the long-lived liability."

Mr. Melnikoff retired from Pru in 1981. He died Aug. 2, 2001; he was 83.