Insurers may find an opportunity in real estate debt
Even a small allocation to this asset class can materially improve an insurer’s portfolio yield.
The real estate debt market has a long track record of performance
Real estate debt provides a differentiated exposure to many of the positive attributes available to real estate equity investors via a more risk-averse position in the capital stack.
Investors are focused on mitigating their RBC risks
Life insurers can maintain or even reduce their RBC requirements by allocating to real estate debt while increasing expected returns.
While historically equity was the most common way investors sought to access the real estate asset class, debt has grown to play an equally important role. Real estate debt provides a differentiated exposure to many of the positive attributes also available to real estate equity investors via a more risk-averse position in the capital stack. The private real estate debt market is large and the emergence of high-quality debt funds has provided a broad cross section of investors with greater opportunity to access the sector.