German institutional investors to invest €8.1 billion into non-listed property funds (DE)
Thursday 10 June 2010
German institutional investors could invest up to €8.1 billion into non-listed funds over the next three years, according to INREV’s Investor Universe Germany Survey 2010. Overall around €26.2 billion is predicted to be invested in real estate as an asset class. The German non-listed real estate universe is estimated at just over €16 billion (excluding other investors) and is expected to grow to €24.4 billion over the next three years.
Current real estate exposures of German institutions at €59 billion are significantly below their target allocations of €84.7 billion. If investors exploit their current full real estate target allocations an additional €25 billion will enter the market. A further €1.2 billion will come from increased allocations creating a total institutional real estate market of €85.9 billion.
“German investors are open to invest in non-listed vehicles but together with joint ventures they currently serve as supplements to direct portfolios. Direct real estate remains the largest component but there will be some shift in this trend as we see a reduction in direct domestic exposures and an increase in non-listed funds such as through transferring assets to (“Spezialfonds”),” said Lonneke Löwik, Director Research and Market Information, INREV.
The German real estate universe is dominated by life insurance companies, which hold around two thirds of the total assets. This is followed by pension schemes for professional occupations (“berufsständische Versorgungswerke”) with 16% and other insurance companies with 13%. Pension funds only hold a small share of the real estate universe, which reflects their size rather than their appetite for real estate.
On average the real estate exposure of German institutions is 5.4% with pension schemes for the professional occupations boasting the highest real estate exposure at14%. Pension funds have 10%.
The composition of non-listed real estate allocations is similar to the total market. Life insurance companies are the largest investors accounting for around 70% of the universe. Other insurance companies and the collective pension schemes for professional occupations hold 14% and 12% respectively. Pension funds only represent a small share at 4%.
Löwik adds, “Domestic investments are the focus of real estate portfolios of German institutional investors, accounting for around two thirds of total real estate. Despite this domestic focus, the majority of investors are exposed to non-domestic real estate. Non-listed is the preferred route to invest internationally, representing around 77% of investors’ non-domestic real estate portfolios. This compares to 23% of domestic real estate and 28% overall. Only the very large life insurance companies and a number of the participating pension schemes for professional occupations have direct exposures to non-domestic real estate.”
Andrea Carpenter, Interim CEO of INREV, said: “The study shows that most investors found it easier to access new markets by choosing the non-listed route. This allows them to buy in external expert management without having to build up own resources and structures abroad. This particularly holds true for smaller institutions with lower absolute real estate exposures and investors that are just starting to build up their real estate portfolios.”
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