IPE Real Assets’ top 100 ranking of some of the world’s largest real estate investors has captured more than $1.34trn (€1.20trn) in real estate assets held by pension funds, sovereign wealth funds and other institutional capital owners.

It was based on IPE Research survey data and publicly available information, predominantly in the form of annual reports. Where accurate numbers were not available, estimates have been made. Some investors have not been included owing to a lack of information.

We also take the opportunity to survey institutional investors on real estate allocation trends, strategies and views on the market. One of the most notable findings this year is that investors are getting increasingly closer to their target allocations. Average target allocations (12.5%) have risen slightly (10bps) from last year, but actual allocations (11.5%) have risen further (40bps).

This means the gap between long-term allocations and investors’ exposure is closing. The finding is consistent with recent investor surveys by real estate associations INREV, ANREV and PREA.

This could have implications for the level of activity in real estate markets. As more investors become fully invested, will the situation lead to less investment in the asset class?

Interviews with investors suggests not. Many of the world’s largest institutions have positive inflows requiring them to continue to make new investments just to maintain their current allocation levels. This is supported by the finding that 53% of investors expect to be net buyers this year, and a further 32% being neither net buyers nor net sellers.

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The Exchange Place skyscraper in Boston was acquired at the end of 2018 for $845m by top 100 investors Allianz (1) and Massachusetts Pension Reserves Investment Management Board (59), and fund manager Beacon Capital Partners

APG, which manages investments on behalf of Dutch pension funds, including the largest ABP, falls into this camp. “Our clients’ real estate exposures are currently within their targeted weightings,” says Rutger van der Lubbe, head of global real estate investment strategy at APG. “As such there is no necessity to either actively increase or reduce real estate exposure, leaving us in a position to act as we see fit.”

Asked whether he expects APG’s level of investment activity to change this year compared with 2018, he says: “We’ve been fairly active in making new investments but actually even more so in follow-on commitments. Our annual activity in terms of reinvestment of income and capital proceeds is typically already in the order of €2bn annually, a pace hence we’ll likely continue.”

The story is similar at APG’s nearest rival, PGGM, which manages the investments of Dutch pension funds, including the country’s second-largest, PFZW. “PGGM will maintain its exposure for 2019,” says Guido Verhoef, head of private real estate. “Our clients are fully invested and we find the prices pretty full.”

He adds: “PGGM has been and will be pretty active in 2019. We have bought and sold as part of our portfolio strategy. Being a large global investor, we will always be able to find opportunities.”

However, some investors are experiencing a slowdown as they become fully invested. Johan Temse, real estate investment manager at AP1, says the Swedish state pension fund is at its 13-14% target allocation and has been looking to maintain this level of exposure. AP1 has undertaken “limited activity on a selected basis” recently and he expects this continue.

Germany’s largest pension fund Bayerische Versorgungskammer (BVK) is expected to continue to be active this year, as its allocation climbs beyond the 20% mark (German regulations place a 25% limit).

“We will continue to increase our allocation to real estate today through direct and indirect investments,” says Rainer Komenda, head of real estate funds at BVK. “While we are today at approximately 21%, we’re still having room to grow, also due to our net-positive income versus pay-out ratio…. We are convinced real estate is a backbone to our multi-asset investment approach. This is due to relatively stable income streams, low correlations to other asset classes and other diversification benefits.”

He adds: “We expect to be part of the active investors in 2019, whilst investing a little bit slower and continuing to be very selective. Net-net we will be increasing, but it could be with fewer but bigger deals.”

Mikko Antila, head of international real estate at Ilmarinen, says the Finnish pensions insurance company will be either a “net buyer or net neutral”, although it is looking to increase its international investments and real estate debt activity.

“We’ve been very active through 2015 to 2018, but are looking at a slightly less active year for real estate equity in 2019,” he says. “We anticipate to be quite active in real estate debt, however, which should leave us net neutral for 2019 in terms of new investments.”

Antila also says that core real estate “has become too pricey in most of our target markets” and that Ilmarinen is “selectively looking at some value-add opportunities”.

This year, value-add took over from core as the most attractive investment strategy in the current market environment. As we highlight on pages 50-51, value-add strategies have become appealing to many investors late in the cycle.

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More than 90% of BVK’s real estate portfolio is made up of core and core-plus investments.  BVK’s Komenda says the pension fund has “started to also look into value creation themes”. He says: “We don’t shy away from developments, forward fundings or purchases – as long as the risks are mitigated, best-in-class partners are involved and planning is in place. With our proprietary fund-of-funds we are covering the value-add/opportunistic side through global commingled funds. Also, we are reviewing the feasibility of doing more in the value creation space.”

Allianz Real Estate, which manages the real estate investments of Allianz insurance companies, is also looking to the value-add end of the market, having historically been focused on core. 

Top 100 Real Estate Investors
 InvestorCountryReal Estate Assets ($’000s)Total Assets ($’000s)
1 Allianz Real Estate Germany 72,400,000 767,200,000
2 China Investment Corporation China 52,853,843 941,417,000
3 ADIA UAE 51,225,000 683,000,000
4 APG Netherlands 48,382,400 535,752,000
5 TIAA US 47,157,700 260,010,000
6 AXA France 36,309,000 1,628,580,000
7 Temasek Singapore 35,315,800 234,930,000
8 QIA Qatar 35,000,000 320,000,000
9 Canada Pension Plan Investment Board Canada 33,904,400 269,734,000
10 CalPERS US 33,430,000 355,820,000
11 Generali Italy 30,196,100 558,170,000
12 PGGM Netherlands 29,967,300 241,340,000
13 Swiss Life Switzerland 29,306,900 215,845,000
14 CalSTRS US 28,733,000 223,800,000
15 Government Pension Fund Global Norway 28,182,700 945,839,000
16 CDPQ Canada 27,999,600 226,489,000
17 GIC Singapore 27,300,000 390,000,000
18 National Pension Service South Korea 25,016,000 563,945,000
19 Prudential UK 22,747,000 626,823,000
20 Ontario Teachers’ Pension Plan Canada 20,313,100 147,688,000
21 Bayerische Versorgungskammer Germany 20,000,000 97,000,000
22 Teacher Retirement System of Texas US 18,300,000 153,100,000
23 Washington State Investment Board US 18,134,465 128,200,000
24 PSP Investments Canada 18,031,700 197,346,000
25 The Crown Estate UK 17,900,000 17,900,000
26 British Columbia Investment Corp/Quadreal Canada 16,367,800 112,946,000
27 OMERS Canada 16,313,000 73,503,200
28 MEAG Munich ERGO Germany 16,013,100 290,523,000
29 Cathay Life Taiwan 15,216,300 210,595,000
30 Aviva UK 14,566,500 597,237,000
31 Florida State Board of Administration US 14,340,904 160,438,425
32 NYSCRF US 14,200,000 207,400,000
33 Standard Life Aberdeen UK 13,152,600 267,276,000
34 Zurich Insurance Group Switzerland 12,126,000 411,058,000
35 BpfBouw Netherlands 11,552,300 64,738,600
36 AMF Sweden 11,416,600 51,964,500
37 AIMCo Canada 10,816,900 83,091,600
38 Manulife Canada 10,760,900 267,088,000
39 MN Netherlands 10,522,900 147,549,000
40 HOOPP Canada 10,481,500 57,904,800
41 Hong Kong Monetary Authority Hong Kong 10,031,100 513,748,000
42 Ohio STRS US 9,800,000 79,900,000
43 MetLife US 9,637,000 719,892,000
44 Alecta Pensionsförsäkring Sweden 8,868,460 91,689,000
45 Legal & General UK 8,838,760 624,559,000
46 Oregon PERF US 8,400,000 75,000,000
47 PFA Denmark 8,134,000 73,769,000
48 Ohio PERS US 8,100,000 81,100,000
49 AustralianSuper Australia 7,735,400 102,037,000
50 Virginia Retirement System US 7,600,000 75,800,000
51 Illinois Teachers Retirement System US 7,400,000 49,900,000
52 State of Wisconsin Investment Board US 7,400,000 93,500,000
53 ATP Denmark 7,320,670 120,224,000
54 BT Group UK 7,155,970 71,497,900
55 CBUS Australia 7,103,000 45,847,000
56 New Jersey Division of Investment US 7,100,000 77,100,000
57 Ilmarinen Finland 7,000,000 52,000,000
58 Samsung Life South Korea 6,509,580 260,200,000
59 Mass PRIM US 6,500,000 69,300,000
60 Future Fund Australia 6,460,560 107,676,000
61 LACERA US 6,300,000 55,900,000
62 Ping An China 6,196,410 1,038,500,000
63 Migros Switzerland 6,050,940 23,696,000
64 UniSuper Australia 5,977,350 50,491,000
65 Fubon Life Taiwan 5,726,050 140,191,000
66 Kanton Zürich Switzerland 5,718,940 33,851,300
67 Employees Provident Fund Malaysia 5,716,580 200,273,000
68 Alaska Permanent Fund Corporation US 5,451,700 61,844,700
69 Pennsylvania PSERS US 5,196,000 53,329,000
70 AP1 Sweden 5,155,280 36,052,500
71 AP2 Sweden 5,118,560 37,232,000
72 AMP Superannuation Australia 5,063,170 39,942,800
73 AP3 Sweden 5,007,290 37,944,100
74 Maryland SRPS US 4,788,000 49,997,000
75 Danica Pension Denmark 4,747,710 86,684,100
76 Qsuper Australia 4,641,240 72,994,000
77 Tennessee CRS US 4,603,526 48,726,954
78 Talanx Germany 4,558,010 140,458,000
79 AP4 Sweden 4,517,690 38,867,700
80 Varma Finland 4,436,770 50,326,800
81 Sunsuper Australia 4,430,270 42,404,000
82 Arizona State Retirement System US 4,315,988 40,790,526
83 Colorado PERA US 4,190,033 50,593,453
84 First State Super Australia 4,008,340 52,882,000
85 PKA Denmark 3,981,950 42,116,800
86 KIC South Korea 3,900,000 -
87 Keva Finland 3,888,890 57,304,000
88 New York Teachers Retirement System US 3,868,000 71,477,000
89 Rest Super Australia 3,797,380 37,833,100
90 ASGA Pensionkasse Switzerland 3,780,120 17,233,000
91 Shinkong Taiwan 3,769,250 97,233,100
92 Ontario Pension Board Canada 3,707,340 21,068,900
93 Ärzteversorgung Westfalen Lippe Germany 3,490,390 15,867,100
94 New York City ERS US 3,476,000 63,845,000
95 Elo Finland 3,431,380 25,849,700
96 Royal Bank of Scotland Group UK 3,402,760 61,867,500
97 PensionDanmark Denmark 3,384,660 36,128,600
98 MLC Super Australia 3,375,450 57,171,600
99 BVV Germany 3,319,280 37,385,300
100 State Super Australia 3,305,120 30,871,300

Overall, return expectations continue to fall and are hovering around the 6.5% mark. Last year, investors on average expected a 7% return and, according to this year’s survey, came close with 6.6%.

Allianz Real Estate outperformed this average, generating a 10% return. But the group expects lower returns this year, between 4% and 6%.

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Antila says: “Real estate equity is more keenly priced and total return expectations are quite a bit lower than for previous years. But on relative terms we still see value in real estate.”

Van der Lubbe says APG’s “required returns are very much vehicle-specific and dependent on a wide variety of factors”. He adds: “As such, we don’t quantify overall return targets, but will suffice to say that both required and expected returns have somewhat decreased as a result of the interest rate environment we operate in.”