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Real estate allocation in institutional portfolios

Real estate allocation in institutional portfolios. Some views from France (and Paris) ERES Vienna 2013 SPR/VOGON/GIF/AREIM Seminar. Etienne Dupuy Chairman AREIM (and CIO BNP Paribas Real Estate SIAM). agenda. We are different Solvency II framework is of primary importance

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Real estate allocation in institutional portfolios

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  1. Real estate allocation in institutional portfolios Someviewsfrom France (and Paris) ERES Vienna 2013 SPR/VOGON/GIF/AREIM Seminar Etienne Dupuy Chairman AREIM (and CIO BNP Paribas Real Estate SIAM)

  2. agenda • We are different • Solvency II frameworkis of primary importance • Real estateasset mix has evolved • Where France buys and whobuys in France

  3. Home ownership

  4. France PF sector is…small PF size as a % of GDP Source : OECD 2012, data as of 2011

  5. We have a different system… Population of France on January 1st, 2013 Source : INED 2013

  6. And wemay have a more direct understanding of issues (?) Age Women Men Population in thousands Source : INSEE 2013

  7. How itshouldwork • Bear on demographics • Bear on health • Education • Wellbeing • Spending • Bear on growth • Bear on savings • (15% of disposableincome)

  8. Pension funds vs. Life Insurance France isbig in insurance premium accumulation USA Japan UK France Germany China Italy Canada S. Korea Netherl’ds Source : FFSA

  9. Savings Insurancesavingsturnednegative in August 2011 for the first time Source : Banque de France / FFSA

  10. agenda • We are different • Solvency II frameworkis of primary importance • Real estateasset mix has evolved • Where France buys and whobuys in France

  11. Regulation: Solvency II

  12. 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

  13. Property underSolvency II • 25% capital charge • Shouldbenear 10-15 • But welack data • Leverageprohibited • Or limited to max 40% LTV • Property vs Privateequity • To berefined… • Transparency ?

  14. How Solvency II isinfluencingasset allocation Real Estate Cash Private bonds Sovereign Stocks Decrease Increase Source : 11/2011 OFI / AGEFI survey (47 Cos)

  15. agenda • We are different • Solvency II frameworkis of primary importance • Real estateasset mix has evolved • Where France buys and whobuys in France

  16. Insuranceasset mix • Allocation isincreasingtowards (covered) bonds, marginally to (direct) real estate • Among major French life insurancecompanies, RE allocation varies from 3.3% to 6.3%, av. 3.9% Source : FFSA

  17. Historical perspective • Fromhousing and office to office and retail, and « diversification » Source : IPD France.

  18. Net investmentssince 1998 • Sellingresidential (yetwith a strongincrease in value…) Source : IPD France.

  19. agenda • We are different • Solvency II frameworkis of primary importance • Real estateasset mix has evolved • Where France buys and whobuys in France

  20. Investingat home is a kind of a tradition for French institutions • Allocation to non-domestic real estate: Source : INREV.

  21. Invest in French CRE: wherefrom ?Welcome home… 4% 2% 7% 3% 23% 18% 39% 5% 2013 2007 1% 2% 2% 4% 5% 64% 11% 2% 9% 13% 2009 20% 66% France UK China Germany North America Source : BNP Paribas Real Estate. Rest of the World € Zone Middle East

  22. Buyers in France 87% 8% 2% 2% 1% 4% 6% 28% 12% 2013 2007 53% 19% 1% 9% 4% 26% 34% 10% 6% 20% 7% 2% 7% 2009 - Research 10% Funds 13% SIIC SCPI Private investors 16% SWF Source : BNP Paribas Real Estate. Other listed Pty Co other OPCI Insurance

  23. Marketasset mix : towardsspecialisation (CRE) 19% HealthCare 75% 4-5 stars 81% Hotels 25% 1-2-3 stars Services 26% Office Indus 52% 3% Log. 6% Retail 13% Source : BNP Paribas Real Estate.

  24. Propertyways • More direct • Lessleverage • LessFunds • More club deals • Listedpropertysector

  25. Investment volumes : France stillliquid € bn 35 30,9 30 26,1 25 20 T4 18,1 17,6 17,2 15,1 15 13,7 T3 12,7 7,9 7,4 11,1 10,4 6,3 10 8,5 T2 3,5 4,7 3,7 3,6 5 4,4 3,3 2,3 T1 1,9 4,1 1,7 2,3 2,2 1,9 0,9 0 2013 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source : BNP Paribas Real Estate.

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