By Adam Ruggiero, William Pattison and Lisa Longino
Core real estate equity offers insurers a multitude of benefits. The sector has historically produced attractive absolute and risk-adjusted returns while acting as a strong diversifier in multi-asset class portfolios. It can serve multiple roles in asset liability matching strategies and offers significant tax advantages for those hoping to produce strong after-tax income returns or manage portfolio level gains and losses. It does not come without its challenges, including higher RBC charges than many other asset classes. Deeper analysis reveals that this challenge can be greatly reduced with time, but those first entering the sector face significant execution challenges as well. Real estate remains a relationship driven asset class where local knowledge can be as essential as analysis of macro trends. We believe that all of these challenges can be met in partnership with an experienced advisor attuned to the goals and needs specific to insurance companies. We believe that those insurers that choose to make an allocation to the sector will soon recognize its benefits and join the many other insurers that have long been counted among its largest and most important investors.
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