Real estate allocation in institutional portfolios Some views from France (and Paris) ERES Vienna 2013 SPR/VOGON/GIF/AREIM Seminar Etienne Dupuy Chairman.

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

4

Source : 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%

16

Source : 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%

2009

39%

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 France

87%

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

SWF

Insurance

SIIC

Other listed Pty Co

SCPI

OPCI

Private investors

other

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 2,34,11,7

1,93,3 4,42,3

3,6

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