The author proposes an asset/liability model to predict the optimal allocation of a pension plan to both privately held and publicly listed real estate. This model includes the impact of such variables as the funding status of the plan, the industry of the plan's sponsor, and the covariance of real estate returns with changes in plan liabilities. The resulting allocations to real estate—which are subdivided by industry and adjusted by funding status—are lower in absolute terms than most traditional mean–variance models suggest and are also closer to empirically observed plan allocations to real estate.