With the support of the Swiss Pension Fund Association ASIP, the Lucerne University of Applied Sciences has examined how pension funds, foundations and life insurances in Switzerland and Liechtenstein invest in real estate and how they manage their real estate portfolio.
Institutional investors are important players on the Swiss and international real estate market. About 2,000 local pension funds allocated high capital investment in direct and indirect real estate investments. More than 16 percent of portfolios are invested in real estate; thereof 110 billion Swiss francs into domestic buildings and land; „only“ 10 billion Swiss francs are invested in foreign markets.
For this „Real Estate Asset Management“ study, headed by Michael Trübestein from the Lucerne University of Applied Sciences, answers from 126 institutions have been analyzed, which together have an investment capacity of 440 billion Swiss francs and a real estate investment of 56 billion Swiss francs. The majority of the institutions surveyed were pension funds (101).
Swiss pension funds primarily invest in the home market
The study shows that pension funds mainly invest in the Swiss real estate market. In particular, the lack of transparency of foreign markets ensures this strategy. This behavior will not change in the coming years. The study also showed the institutional requirements for the selection of external management and for the administration of their real estate portfolio. The focus is on experience, reputation and costs.
Reputation as a decision criterion
The research team also asked the investors about the criteria that are important for the selection of an external management for the administration of their real estate portfolios: the pension funds, foundations, and life insurance companies pay close attention to the experience, reputation and costs of the service provider, while contractual aspects, such as the term of the contract or the equity participation of the management in the real estate portfolio, play a less important role.
Opportunities will be harder to find in the future
Asked about the most important investment objective for investments in direct real estate investments, the institutions called for a long-term orientation. Pension funds invest in buildings and land to help them achieve a defined return, maintain their capital and protect themselves from inflation.