Dutch investors lead the field in terms of non-listed investing in Europe, according to a survey from INREV.
The Investor Universe Netherlands Survey reports that the Dutch institutional real estate market is 121.7 billion, of which 41.6 billion is invested in non-listed, forming an integral part of their investing strategy.
Lonneke Löwik, Director of Research and Market Information, INREV, said: "Dutch investors are highly sophisticated in their strategies for real estate. They have used the asset class for longer than their peers in other countries and make strategic decisions to include non-listed in their portfolio, rather than use it as a supplement to their direct investments."
The large real estate universe is a factor of the overall size of the Dutch institutional market but is also due to their high allocations to real estate. Real estate represents 10.5% of the total assets of Dutch investors. The market is twice the size of the German institutional real estate universe and about the same size as that of the UK.
Dutch investors' high allocations to non-listed means that their direct real estate holdings, valued at approximately 45 billion, are only slightly larger than their non-listed holdings. Insurance companies and a limited number of the large pension funds hold most of these direct real estate investments, the vast majority of which are domestic.
Many of the small and medium-sized pension funds already invest heavily via non-listed (75% and 60% respectively). They choose this route as they want the benefits of real estate such as stable returns and diversification but do not have the resources and scale to invest directly.
There is less of a clear trend in real estate investing for the larger Dutch investors. Large insurance companies have invested approximately 60% in direct domestic real estate, 20% in non-listed funds (domestic and non-domestic) and 20% in other categories, such as mortgage backed securities. Large pension funds on the other hand have a preference for non-listed at 41%, while 33% is invested in listed real estate and only 21% is invested in direct real estate.
Dutch pension funds invest more in real estate abroad than in the Netherlands, while insurance funds prefer direct domestic investments. Overall, non-domestic real estate exposure is 57% of the total real estate allocation. In contrast, non-domestic real estate investments account for 35% of the total German real estate universe, while in the UK they are only 11% of the total.
Löwik added: "Dutch pension funds' sheer size and the relatively small Dutch real estate market are major influences on their non-domestic strategies. The majority is indirect with almost half of their non-domestic real estate exposure invested via non-listed vehicles and slightly less via listed vehicles. Only a small percentage of non-domestic is invested directly, but this comes primarily from exposures left over from previous strategies or mergers with this set to grow by 12.5 billion over the next three years."
The non-listed allocation represents two thirds of the extra 16.6 billion to be invested in real estate as a whole, reflecting the Dutch investor's high interest in the investment approach.
The non-listed share of the Dutch real estate investments is estimated to be 41.6 billion, representing 3.5% of total assets and 34% of their total real estate investments. This share is forecast to grow to 38% over the next three years, rising by 12.5 billion to 54 billion, which is an increase of 30% and represents two thirds of the extra 16.6 billion to be invested in real estate. It is notable that this growth is largely the result of new allocations to real estate and also that three-quarters of the investors without non-listed exposure are considering adding it within the next three years.
This survey is the third in a series of reports on the size of the European investor universe following similar studies in the UK and Germany. A survey on the Swedish investor universe will be available at the end of the