German pension fund BVK aims to boost real estate allocation

Speaking during a panel session hosted by INREV at MIPIM last month, Komenda said BVK currently has assets under management of €75 bn, of which 14% is allocated to real estate.

Asked whether BVK was planning to commit more capital to real estate this year than in 2015, he answered: 'Unfortunately yes. We are cautious in the short term, but for the long term we see a continued low interest rate environment. We are heavily invested in alternatives and real estate is a big part of that.'

The current low interest rate environment has contributed to the enormous popularity of real estate as an asset class in recent years. According to INREV's latest Capital Raising Survey, the amount of capital available for non-listed real estate rose last year to new record of €124 bn. As a result, product has become scarce and yields have compressed to historic lows.

'The markets are peaking, I'm not sure whether the performance this year will be as good as past years,' Komenda commented.

Depending on the market, BVK plans to grow its real estate allocation to 15-16%, he added. That would mean an extra spend of up to €1.5 bn. Traditionally BVK has invested in its home market, but in recent years it has taken steps to diversify its exposure both in Europe and globally via separate mandates with multi-manager funds like CBRE Global Investors and LaSalle Investment Management.

BVK has about €4 bn tied up in German real estate and another €7 bn outside its home market, including a securities allocation of around €1 bn. BVK tends to invest in funds for niche sectors involving investments under €500 mln, Komenda said. It is also active as a direct lender in Germany.