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Allianz’s real estate business is targeting €100bn AUM by 2024

Chief executive François Trausch says the ambitious plan will partly be driven by lending.

When François Trausch succeeded Olivier Piani as head of German insurer Allianz’s real estate business in 2016, he outlined an ambitious plan to expand from approximately €45 billion of assets under management to €60 billion by 2020. This target was achieved 18 months ahead of schedule.

The Frenchman has set another ambitious plan for growth, this time for €100 billion of AUM by 2024. At this year’s PERE Europe Summit, hosted by our sister title on 25-26 June in London, Jonathan Brasse, PEI’s senior editor, real estate, asked Trausch how Allianz would achieve this.

The role of the insurer’s real estate debt business featured prominently in Trausch’s answer. He highlighted three areas in which the €60 billion target was achieved, including investing in €3.5 billion of Asian assets, as well as growing Allianz’s fund investment business to around €10 billion. He also pointed to accelerating growth in the company’s real estate debt business, which is now eight years old and had a €7.8 billion European loan portfolio as of March. The business is run from Paris by Roland Fuchs, head of European debt.

“There’s never been a better time to be on the senior lending side for an insurance company because the banks don’t have the balance sheets for this anymore,” he said. “For insurance companies, it’s a way to match long-term liabilities with long-term assets. So the lending business is another very safe way to play the market.”

According to Trausch, a willingness to diversify – including by type of asset, such as loans – is the key to growth. He told the audience that equity investing and lending, the latter of which he described as a “fast-growing business”, would help Allianz achieve its next growth target, which will require a run rate of €8.75 billion a year in a late-cycle market.

“We wouldn’t get to the €100 billion if it wasn’t for the support of the lending business,” he said. “We have a very large business in Europe and in the US. I think there is an opportunity for us to develop a lending business in selective Asian markets.

“As long as Allianz is willing for us to add a new strategy each year, we can, as an organisation, get there.”

In May, Allianz announced the opening of a London office, in part to help drive the origination of pan-European debt deals where the asset or borrower is in the UK. The firm appointed Shripal Shah, a former HSBC and Barclays banker who was most recently head of real estate at advisory firm JCRA, as head of debt origination for the office.

Speaking about the decision to open in London, Trausch said: “We did it to further extend our lending business into the UK, because we see a big opportunity on the lending side here, where banks are a bit on the sidelines. We don’t have a lot of equity exposure, so I think doing the lending side is fine.”

Third-party capital

In October 2018, PERE revealed Allianz’s real estate business was poised to raise external capital for the first time, for the debt strategy, and was making use of a debt fund established in Luxembourg. In June, the firm said its debt fund had deployed €1.5 billion.

“We originate ourselves rather than take stakes in bank consortiums, so we have a loan-to-own mindset,” Trausch told the audience at the PERE Europe Summit. “We have a good product that is not available to smaller insurance players. Eighteen months ago, we organised our business as a Luxembourg fund to make it easy to structure loans internally, so it was simple to open that fund to third-party investors.”

Senior real estate debt, he explained, is akin to a fixed-income product. He added that for group investors seeking fixed-income returns, property loans were among 20 business lines within the organisation from which they could choose, and that it therefore made sense to diversify funding sources to outside the company: “When it comes to real estate lending, we probably originate more than Allianz needs.”