SWITZERLAND - Nine out of 10 Swiss pensions funds are indirectly invested in real estate while the majority also directly invest in the market, according to research from real estate investment specialist Sal Oppenheim.
A study conducted by Sal Oppenheim Real Estate and 4IP Management Ltd found 89% of Swiss pension funds hold indirect real estate investments while 72% have direct investments, suggesting investors are still keen on real estate as an asset class though the preferred investment route is still the indirect approach through investment funds.
The survey of investment directors with CHF63bn (€bn) in real estate assets under management looked at their existing holdings and asset allocation intentions, working in collaboration with the Department of Financial Management at Basle University, and discovered the average allocation to real estate - direct or indirect - was 18% among pension funds in contrast to insurers who had just 13% allocated to property.
When it comes to holding direct property, Swiss pension funds prefer domestic real estate.
Residential is favoured, as 66% of their direct holdings were found to be in the residential market.
"Offices" comes in second place, with a 19% allocation by pension funds and 25% by insurance companies, respectively, but the latter group indicating a desire to increase their exposure to residential properties while reducing their office and industrial property holdings over the next two years.
Pension funds also had a 15% allocation to listed real estate and the majority of participants plan to keep that holding over the next two years, albeit they may turn their attention to Asia.
That said, indirect non-listed real estate investment vehicles such as non-listed funds and investment foundations are increasingly favoured, according to the Sal Oppenheim study, as 69% of pension funds were invested in this asset class.
Sal Oppenheim noted the ongoing financial crisis, with related sharp stock market corrections and heightened economic uncertainty, has not made investment decisions easier for pension funds, but the allocation and investment behaviours revealed in the survey, however, demonstrate that Swiss institutional investors continue to believe in the real estate asset class.
This study comes only a week after the Swiss government reduced existing real estate investment terms from 50% domestic and 5% overseas to 30% in total. (See earlier IPE story: Minimum return rate to be slashed)
A full copy of the report is available in German while executive summaries are published in English, French and German.