German insurance giant Allianz plans to boost its investments in alternative sectors, including real estate, by €40 bn over the next few years, global CIO Andreas Gruber has told PropertyEU CapitalWatch.
In an interview published in CapitalWatch’s inaugural issue which is being launched at Mipim this week, Gruber said Allianz already increased its alternatives investments by 18% to €101 bn in 2016. 'We plan to increase these assets further to €140 bn over the coming years,' he said.
Allianz boosted its global real estate investment portfolio to €50 bn in 2016 following almost €6 bn of new investments.
'I very much like strategies in alternative investments, ranging from private equity and infrastructure investments, via renewable energy and real estate investments, to private debt strategies in project financing and middle market lending in selected regions,' Gruber said. 'These investments offer an attractive return and are less volatile than public equities.'
The Allianz investment head oversees one of the largest global institutional investment portfolios valued at €653 bn. As such, delegates at this year’s Mipim will look to such investors to provide clues as to how capital is approaching property markets given increased political and economic risks.
Asked how he would characterise Europe and particularly real estate investing, the Allianz CIO said there are 'two sides of the same coin'.
'We like the clear improvements in the economic growth environment. Most European countries are experiencing moderate but resilient GDP growth, declining unemployment, and a more stable economic environment than a few years ago. The flip side is that equity and especially real estate markets have largely priced in this positive development already.'
Expensive but attractive
Turning to the role of real estate in Allianz's portfolio, Gruber said that compared to historical valuations, real estate is an expensive asset class. However, thanks to quantitative easing, this is true of all asset classes, he noted. 'Relative to risk-free assets, real estate is still attractive.'
Core real estate represents 'relatively stable' and secure long-term cash flows, a partial inflation hedge, low volatility and 'relatively low' correlation in comparison to other asset classes such as equities or bonds, according to Gruber. 'Real estate is the biggest alternative investment asset class, providing a broad and relatively liquid investable universe. Additionally, active asset management of real estate has the ability to grow the intrinsic value of the investments, in particular for value-add properties,' he said.
Commenting on the global investment climate, Gruber summed up the mood as follows: 'Our economic outlook is quite benign. Yet here is the flip side: political and economic risks have clearly increased.'
