An Overview of Insurance Companies Investing in Private Real Estate – October 2015

by Charles Wood

  • 28 Oct 2015
  • RE

Preqin’s Real Estate Online database contains detailed profiles for 366 insurance companies actively investing in the real estate asset class. Their substantial assets under management (AUM) make them a significant source of institutional capital in the private real estate market.

The average allocation to private real estate made by insurance companies has remained constant, at a sizeable $2.2bn, since 2014, owing to the favourable characteristics of private real estate; with long investment horizons, these funds compliment the long-term liabilities held by insurance companies. Demonstrating the capability of insurance companies to cultivate large portfolios, a substantial 39% of these investors have allocated over $1bn to the asset class, including 13% investing more than $5bn. However, nearly half of insurance companies allocate less than $500mn to real estate.

The majority of insurance companies active the asset class have a preference for North America-focused private real estate funds (58% of insurance companies) and Europe-focused vehicles (52%), whereas Asia is a stated preference of only 24% of insurance companies tracked by Preqin. In terms of strategy, insurance companies are seeking exposure to private real estate through both lower and higher risk vehicles. Core and value added private real estate funds were a preference for the largest proportion of insurers (55%), followed by opportunistic (53%), core-plus (40%), debt (31%) and distressed (21%) vehicles. Only 9% will consider investing in real estate fund of funds vehicles, indicative of the sophistication in the asset class of this type of institutional investor.

Ohio Bureau of Workers' Compensation is a firm looking to increase the size of its private real estate portfolio. In Q2 2015, the North America-based insurance company announced $1bn in commitments across 10-12 real estate funds in the following 12 months. The state-funded insurance company is seeking exposure to core, core-plus and value added strategies in North American property. It has designated $650-700mn to core-plus vehicles, with the remainder invested predominantly in value added vehicles. Geographically, the new commitments will be split, with approximately 95% going to funds in the US and 5% to funds in Canada. 

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