German insurers, Versorgungswerke and Pensionskassen have legal clarity that investments in real estate Spezialfonds will remain part of their real estate allocation.
The news will come as a relief for the German real estate industry, as a previous draft of the amendments to the insurance ordinance – AnlV-E – presented a year ago, would have introduced severe restrictions to such investments.
Originally, only those open-ended Spezialfonds solely invested in UCITS structures would have qualified as part of the property exposure.
Other funds would have been put into the new category of ‘alternative strategies’, capped at 7.5%.
The restriction has now been scrapped, meaning insurers, Versorgungswerke and Pensionskassen – to which the AnlV-E applies – can continue to invest in Spezialfonds, as well as closed-end retail funds under their 25% property allocation.
Michael Schneider, managing director at IntReal, said the amendments to the regulation were “clear and successful” and “very important for the further development of the industry”.
He said insurers and pension funds were also now allowed to invest in real estate via a closed-end Investment-KG, introduced with the Kapitalanlagegesetzbuch (KAGB), Germany’s answer to implementing the AIFM Directive.
What might prove even more important in the current low-interest rate environment, however, are the legal provisions for investing in infrastructure loans.
Sonja Knorr, senior analyst at Scope Ratings, said: “The possibility to invest in non-securitised loans such as infrastructure loan receivables allows for the launch of specific funds, which will also allow smaller institutions to invest in infrastructure.”
She added that European Long-Term Investment Funds (ELTIFs) could also be attractive for large insurers’ long-term infrastructure investments.
ELTIFs can now be set up as closed-end funds with fixed maturity.
Schneider is also glad the new regulations put infrastructure investments on a “solid legal basis”.
The IntReal managing director acknowledged, however, that some details were still to be finalised by the German supervisory authority BaFin, such as the limits to debt financing in certain fund vehicles.
Under the new regulations, institutions will also be able to invest in high-yield corporate loans, capped at a 5% allocation.
The AnlV-E will apply to larger insurers only until 2016, when Solvency II takes full effect.
However, Schneider predicted the regulations put in place now could continue to serve as a “best practice” standard, even under the new framework for large insurers, which does not include any restrictions at all as long as sufficient capital is put aside.
For Versorgungswerke and Pensionskassen, as well as smaller insurers, the AnlV-E will continue to apply, however.
