After the first batch of public offering REITs and insurance funds “love at first sight”, it has now reached the stage of “certification”.
On November 17, the China Banking and Insurance Regulatory Commission issued the “Notice on Issues Concerning the Investment of Insurance Funds in Publicly Raised Infrastructure Securities Investment Funds” (hereinafter referred to as the “Notice”). The main contents include clarification of institutional qualifications, setting of investment target conditions, and improvement of risk management procedures. , Strengthen the active management of investment, and strengthen the requirements for supervision and management.
The “Notice” clarifies that insurance funds can be invested in public offering REITs. This means that REITs are moving from a niche market with few participants to financial products recognized by more and more mainstream investors.
Public REITs are the best match for insurance funds?
“Among all institutional investors, insurance funds have the longest duration and best match with public REITs.” On November 18, an investment manager of a Shanghai-based insurance asset management company told Times Weekly reporters that there is no such thing in China. Before this investment product, its institution has conducted in-depth research on REITs.
In fact, in the first batch of publicly offered REITs, the biggest player among institutional investors is insurance capital. In the strategic allotment link, insurance strategic investors promised to subscribe for a total of 3.336 billion yuan, accounting for 34.6%, which is an important source of strategic allotment in addition to the original stakeholders.
Statistics show that six insurance companies including Taikang Life, Ping An Life, Dawei Investment Holdings, China Insurance Investment Fund (Limited Partnership), China Re Life, China Re P&C have become strategic investors in public REITs, among which Taikang Life’s investment The amount is as high as 1.369 billion yuan.
In the offline subscription link, the participation of insurance capital institutions is even higher. PICC Life, Xinhua Insurance, Taiping Life, Taiping P&C, Great Wall Life, Everbright Sun Life, Dajia Life, Sunshine Life, CPIC, CPIC Life, CPIC P&C, Asia Pacific P&C and other insurers’ accounts have all been awarded Placing.
At the same time, the low correlation between public REITs and the securities market is also worthy of attention. From the listing of the first batch of public REITs to November 15, the return rate of the Shanghai and Shenzhen 300 Index during the same period was -4.04%, which was in sharp contrast with the 17.56% of public REITs.
The China Banking and Insurance Regulatory Commission stated that the timely inclusion of publicly offered REITs into the scope of insurance fund investment is conducive to diversifying investment risks and helping to revitalize existing infrastructure assets. In the next step, we will continue to improve the policy system, strengthen classification guidance, support insurance funds to standardize the development of infrastructure fund investment business, and prevent investment risks.
CITIC Securities Research Report pointed out that the investment attributes of publicly offered REITs include: the underlying assets have a long operating cycle, but they can provide long-term stable cash flow; the investment scale is generally large; the anti-cyclical is good, and it is related to large-scale assets such as stocks and bonds. The low performance is in line with the characteristics of insurance funds and investment needs.
Overall, this official document issued by the China Banking and Insurance Regulatory Commission clarifies that publicly-raised infrastructure securities investment funds (REITs) are within the scope of investment, belong to real estate, and are refined in many places, which will help attract more insurance funds for this category of assets. The attention and configuration of the company will help the public REITs market to develop well. As of the latest data in September this year, the balance of insurance funds used is 22.44 trillion yuan.
It is worth mentioning that not all insurance funds have admission qualifications. The “Notice” proposes that, for publicly offered REITs invested by insurance funds, fund managers and asset-backed securities managers shall comply with the China Banking and Insurance Regulatory Commission’s requirements for insurance funds to invest in real estate in terms of registered capital, managed assets, professionals, asset custody, and risk isolation. Product regulatory requirements. The relevant person in charge of the China Banking and Insurance Regulatory Commission emphasized that publicly offered REITs have both the attributes of open market equity products and real estate assets, and insist on penetrating supervision in accordance with the essence of the business.
The second batch of public offering REITs are ready to come out
For publicly offered REITs, insurance capital still does not feel “satisfied.” The investment manager of the above-mentioned insurance asset management company expressed the hope that in the future, insurance funds can have more presence in public REITs. In view of the strict proportional restrictions on the use of insurance funds in each category, it is currently placed in the real estate and open market equity categories, and the volume will still be limited. If more consideration can be given to the “quasi-fixed income” characteristics of public REITs, it may be more enthusiastic for insurance funds to participate.
Up to now, the operation of publicly offered REITs has been quite stable. Since its listing, the first batch of publicly offered REITs have yielded substantial returns, improved liquidity, and their valuations have risen sharply. According to the data, as of November 15, the average yield of the first 9 publicly offered REITs since their listing has been 17.56%. Except for Ping An Guanghe’s cumulative return rate of -0.023%, the other 8 publicly offered REITs have all received positive returns, and half of the REITs have a return rate of more than 20%. AVIC Shougang, which has the highest rate of return, has a cumulative rate of return of 32.07%.
It is worth noting that after the first batch of public offering REITs “started well”, more latecomers appeared. In the past two months, a total of 4 publicly offered REITs in the second batch have entered the issuance approval process one after another, of which 2 REITs will be subscribed soon.
From October 15, 2021 to November 15, 2021, a total of 4 publicly offered REITs have submitted registration applications to the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Each of the Shenzhen Stock Exchange and the Shanghai Stock Exchange has one REIT product that has been approved by the exchange. After the inquiry is over, they will be listed and traded, and the other two REITs have also entered the approval status of the Shanghai Stock Exchange.
Obviously, the market has high hopes for the two public REITs that will be raised later this month. The first batch of publicly offered REITs were sold out on the first day of issuance, and the excess returns that have been superimposed so far have given the market an expectation of “early closing”.
The successful issuance of the first batch of publicly offered REITs has played a leading role in the subsequent issuance of related products. The second batch of CCB Zhongguancun REIT (180202.OF) and Huaxia Yuexiu Expressway REIT (508099.OF) that have been approved by the exchange will be subscribed and paid in a concentrated manner during the period from November 26, 2021 to November 29, 2021. payment.
Industry insiders remain optimistic about the future development prospects of REITs. As the origin of REITs, North America is also the most mature region for REITs development. REITs account for more than 90% of listed real estate securities; followed by developed markets in Europe and Asia Pacific, REITs account for more than 40% of listed real estate securities.Return to Sohu to see more
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