The routing of the world’s stock markets and slashing of interest rates amid the rapid spread of coronavirus is further reminding institutions how sizable equities and bond exposures remain conundrums for institutional portfolios.

Europe’s major insurers are alive to the challenge. Last week, two announced plans to provide institutional money with new avenues to better access the more illiquid and income generative alternative assets spaces.

Within minutes of each other, first Munich’s Allianz, then Paris’s AXA, announced plans on 10 March to consolidate divisions with the intention to better channel their distribution capabilities into real estate markets.

Allianz has seemingly made the bigger of the moves, having transferred its dedicated real estate business, Allianz Real Estate, from its investment division to its asset management division, where it will be merged with the nearly $2 trillion San Francisco-based asset manager PIMCO. Better known as a fixed-income giant, PIMCO also operates a real estate business running commingled funds – and is already well plugged in to a third-party distribution network that Allianz Real Estate can also tap into.

Allianz Real Estate today has approximately €70 billion in assets on its books, the overwhelming majority invested using Allianz capital. Combined with PIMCO’s €30 billion of property AUM, we are potentially talking about the next mega-manager of real estate assets. But beyond the scale, it will be the integration of PIMCO’s distribution network – serving one of the world’s largest asset managers – with the 500-plus staff, 21-office Allianz Real Estate team that should have the greatest impact.

With minimal operation overlap, investors theoretically get to access a combined real estate business offering global coverage in equity and debt and the complete risk and return spectrum – albeit Asia remains a small part of the offering.

AXA is arguably further along in refining its investment management operation to ensure its real estate business is optimally accessible to outsiders. The insurer has essentially consolidated the various business units of its approximately €700 billion manager division into two large platforms: AXA Investment Managers Core, a €536 billion operation investing in the traditional equities and bonds markets; and AXA Investment Managers Alts, a €137 billion alternatives division doing likewise for the real assets, structured finance and hedge funds markets.

Again, by combining divisions and reallocating resources, including its distribution channels, AXA is hoping to improve on its current approximately 60:40 in-house to outside capital ratio.

These two sizable reconfigurations will no doubt have varying degrees of effective execution – Allianz Real Estate’s bundling with PIMCO looks to be the more complicated on first look. Nonetheless, by now more prominently positioning its alternatives businesses in the institutional market, two of the world’s bluest-chip financial brands are the latest to push the thesis this capital has been too frequently battered by inappropriate weightings to the traditional asset classes.

Traditional asset classes – by yielding too little in lower-for-longer interest rate environments, or being too volatile in highly sensitive geopolitical, geoclimatic and generally disruptive times – are not allowing institutional capital to meet their liabilities. As such, rebalancings like these should serve as key indicators that allocations to alternatives will only move northwards.