A trend among Swiss pension funds towards direct and indirect real estate investments in Switzerland and abroad can be observed in the investment portfolios. Nevertheless, the real estate-related investment policy is characterized by various challenges and diverse institutional restrictions. The challenges are decreasing returns and market opportunities, a lack of investment alternatives, (geo)political changes and instabilities and their effects on previously reliable real estate markets. In addition, developments in IT/software and changing lifestyles confront institutional investors with many new challenges in real estate investments. As a result, structuring and management, and also the selection of managers and control of an internal and/or external asset manager, are becoming increasingly important in real estate investments.
This is the starting point for this study, which was carried out this year for the fifth time in a joint project between the Swiss Pension Fund Association ASIP and the Lucerne University of Applied Sciences and Arts in Switzerland. This enables a targeted and critical comparison of developments in the real estate sector and allows valuable recommendations for actions to be derived in a structured manner.
First of all, the study shows that the investigated pension funds invest primarily in their home market and wish to maintain this investment policy in the future ("home-biased"). A focus on residential real estate is understandable, although other types of real estate could potentially offer interesting investment alternatives. In comparison with recent years, it can be said that foreign real estate markets are becoming increasingly attractive.
The current organizational structures in Real Estate Asset Management are diverse - purely internal structures, external management of real estate investments or a combination with internal and external specialists characterize the practice. The study highlights the advantages and disadvantages of the various organizational structures. Strategic areas (definition of strategy and reporting) are mostly defined internally by the top management body of the pension fund, while selected areas can be provided by external consultants. In comparison with recent years, an increasing externalization of service provision can be recognized.
According to the results of the study, pension funds also prefer Switzerland for indirect real estate investments. The focus is primarily on investments in Swiss investment foundations just as listed real estate companies. Qualitative criteria such as manager experience/track record and costs continue to dominate the selection of an external manager for indirect real estate investments.
The investigated investors show a growing interest in investing in "infrastructures", particularly in the areas of electricity/power grids, wind energy/photovoltaics or water/wastewater. However, political and legal risks are defined as clear barriers to investment.
We hope that the practice-oriented study will provide answers to current questions related to pension funds' investment activities in direct and indirect real estate investments. We wish you, dear readers, an informative and exciting reading of this study.
Hanspeter Konrad, lic. iur Attorney at Law and Prof. Dr. Michael Trübestein MRICS
*The study results can be viewed under the following link under "Study results" and saved in book form:
*only available in german