real estate allocation in institutional portfolios
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Real estate allocation in institutional portfoliosSome views from France (and Paris)
ERES Vienna 2013SPR/VOGON/GIF/AREIM Seminar
Etienne DupuyChairman AREIM
(and CIO BNP Paribas Real Estate SIAM)
agenda
• We are different• Solvency II framework is of primary
importance• Real estate asset mix has evolved• Where France buys and who buys in
France
2
Home ownership
3
France PF sector is…small
4Source : OECD 2012, data as of 2011
PF size as a % of GDP
We have a different system…
5
Population of France on January 1st, 2013Source : INED 2013
And we may have a more direct understanding of issues (?)
6
Source : INSEE 2013 Population in thousands
Women
Men
Age
How it should work
• Bear on demographics• Bear on health
– Education– Well being– Spending
• Bear on growth• Bear on savings
– (15% of disposable income)
7
Pension funds vs. Life Insurance
8
France is big in insurance premium accumulation
Source : FFSA
USA
Japan
UK
France
Germany China
Italy
Canada
S. Korea Netherl’ds
Savings
9
Insurance savings turned negative in August 2011 for the first time
Source : Banque de France / FFSA
agenda
• We are different• Solvency II framework is of primary
importance• Real estate asset mix has evolved• Where France buys and who buys in
France
10
Regulation: Solvency II
11
Regulation: Solvency II 2.0
• CRE loans not as favourably treated• New or increased role of rating agencies ?• Look through approach seems applicable• Anyway : transparency on risks taken,
disclosure, accountability• Eventually: who will control those new OTC
or non listed investments?• We need… a market
12
Property under Solvency II
• 25% capital charge• Should be near 10-15• But we lack data• Leverage prohibited
– Or limited to max 40% LTV• Property vs Private equity
– To be refined…– Transparency ?
13
How Solvency II is influencing asset allocation
14
Real Estate
Cash
Private bonds
Sovereign
Stocks
Decrease Increase
Source : 11/2011 OFI / AGEFI survey (47 Cos)
agenda
• We are different• Solvency II framework is of primary
importance• Real estate asset mix has evolved• Where France buys and who buys in
France
15
Insurance asset mix
• Allocation is increasing towards (covered) bonds, marginally to (direct) real estate
• Among major French life insurance companies, RE allocation varies from 3.3% to 6.3%, av. 3.9%
16Source : FFSA
Historical perspective
• From housing and office to office and retail, and « diversification »
Source : IPD France.
17
Net investments since 1998
• Selling residential (yet with a strong increase in value…)
Source : IPD France.
18
agenda
• We are different• Solvency II framework is of primary
importance• Real estate asset mix has evolved• Where France buys and who buys in
France
19
Investing at home is a kind of a tradition for French institutions
• Allocation to non-domestic real estate:
20
Source : INREV.
Invest in French CRE: where from ?Welcome home…
64%2%
5%
18%
7% 4%
2013
66%
20%
4%2%
2%1%5%
200939%
9%13%
11%
23%
3%2%
2007
France
Germany
€ Zone
UK
North America
Middle East
China
Rest of the WorldSource : BNP Paribas Real Estate.
21
Buyers in France87%
28%
4%
20%7%6%
19%
6%2%
8%
2013
34%
13%16%
10%
7%
10%
9%1%
200953%
2%
26%
12%4%
2%
2007
-Research
Funds
SWFInsurance
SIICOther listed Pty Co
SCPI
OPCI
Private investorsother
1%
Source : BNP Paribas Real Estate.
22
Market asset mix : towards specialisation (CRE)
Office52%
Retail13%
Log.6%
Indus3%
Services26%
Hotels 81%
19%HealthCare
4-5 stars 75%
1-2-3 stars 25%
Source : BNP Paribas Real Estate.
23
Property ways
• More direct• Less leverage• Less Funds• More club deals• Listed property sector
24
Investment volumes : France still liquid
0,9 1,9 2,2 2,3 4,11,71,9 3,3 4,42,33,6
4,7 3,53,7
6,3
7,9 7,410,4 11,1
12,7
17,2
26,1
30,9
15,1
8,5
13,7
18,1 17,6
0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
T4
T3
T2
T1
€ bn
Source : BNP Paribas Real Estate.
2013
25
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