Asia-Pacific Insurance Companies Investing in Private Real Estate Funds – May 2014

by Joyce Chee

  • 09 May 2014
  • RE

Asia-Pacific is home to 68 insurance firms that are actively or considering investing in the real estate asset class. These insurers manage a collective $4tn in total assets, with an allocation of approximately $76bn to real estate. Compared to April 2013, there has been a substantial increase of 26% in the number of Asia-Pacific investors in real estate. This is indicative of an increase in appetite for the asset class among insurers. Asia-Pacific insurance companies have seen changes in the real estate landscape in recent years. In Q1 2014, China Insurance Regulatory Commission once again revised its guidelines to allow Chinese insurers to invest 30% of their investment portfolios in real estate. This is a noteworthy revision as back in 2012 they allowed a maximum 15% to be allocated to real estate. In Japan, insurers are also looking to real estate in a bid to seek higher returns and also to shift from their usual investments in domestic bonds. So where are these insurance companies located in Asia-Pacific and what are their investment preferences? 

Of the 68 Asia-Pacific investors in real estate, a substantial 46% of these insurance companies have exposure to private real estate funds. A significant 32% of investors in unlisted vehicles hail from South Korea. Twenty-six percent of the insurer investor pool is based in Japan, while Singapore-based and Australia-based insurance companies each constitute 10% of the institutional investors. India- and Taiwan-based insurance firms make up 12% of these investors with an interest in unlisted vehicles while insurers located in Hong Kong, New Zealand and Thailand each account for 3% of these Asia-Pacific investors. 

Core and core-plus strategies have a strong appeal to insurance firms with an interest in unlisted property vehicles. A significant 74% of Asia-Pacific insurers have a preference for core vehicles while 70% of institutional investors are inclined to invest in core-plus funds. This is an increase from 63% of the investor pool in April 2013 which held a preference for core and core-plus vehicles during that period. A possible reason for this could be that Asia-Pacific investors are still relatively new to unlisted funds and are easing into the asset class. Fifty-two percent of insurance companies favour funds employing value added strategies, while 35% prefer opportunistic funds. Debt vehicles are considered by 30% of Asia-Pacific institutions. 

In terms of geographical preference, the Asia-Pacific region is still the top (90%) destination for Asia-Pacific insurers targeting private fund investments compared to 72% in April 2013. Europe is highly regarded by 45% of insurance companies based in Asia-Pacific, while 41% of institutions will target North America. Thirty-one percent of the investor pool has a global outlook when it comes to investing in private real estate funds, while 17% have a preference for emerging markets which include countries such as Argentina, Czech Republic, India, Mexico and Romania. 

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