To reinforce the gains of the multi-support part of their life insurance contracts, via unit-linked (UC), without taking on the level of risk of equity funds, some savers are turning to real estate supports.
To compensate for the weakness of the fund’s returns in euros, which have also been hit hard by inflation estimated at 5.8% in France in June 2022 according to INSEE, certain real estate supports can present advantages if they are used in the units of account (UA) of a life insurance policy.
These may be civil real estate investment companies (SCPI) or, less frequently, real estate collective investment bodies (OPCI). Another family of supports is being developed through civil real estate companies (SCI).
While SCPIs hold buildings directly at 100%, SCIs in life insurance constitute a kind of “fund of funds” which can draw on various real estate assets – shares in SCPIs, OPCIs, simplified joint-stock companies ( SAS) that hold real estate directly, club deals (groups of qualified investors) invested in real estate, or even active or index fund units (UCITS).
These vehicles sometimes tend to favor the holding of other funds, sometimes the direct holding of real estate. But in general SCPIs and similar represent nearly two-thirds of this type of portfolio. And the direct holding of real estate a small third. This gives the manager the possibility of remaining flexible on his investment profile.
An average return of 3.8% in 2021
According to the French association of real estate investment companies (ASPIM), these SCIs in life insurance would have posted an average yield of 3.8% in 2021, after 2.9% in 2020. A result lower than that of the average of SCPI of 4.5% in 2021 according to the ASPIM. In particular, SCIs would have higher management fees. To which are added the costs of managing the life insurance policy. These SCIs are liquid, whereas the SCPIs are not, or much less so. But unlike SCPIs, they do not distribute income.
New but growing
There are currently around thirty SCIs intended for life insurance. Most are of very recent creation.
Despite their young age, they weigh heavily in outstandings. According to the ASPIM, they would represent, at the end of the first quarter of 2022, nearly 20 billion euros, out of a total of more than 81 billion euros, or almost a quarter. And in 2021, these SCIs would have collected more than 3 billion euros.
The flexibility of the investment process can enable these SCIs to take into account, in their investments, the major developments that have occurred in professional real estate in recent years, in particular under the effect of the health crisis, with the rise of teleworking or changes in shopping center traffic linked to the development of online sales.
Amundi and La Française, historical players, offer several products eligible for life insurance. Other managers have an offer in the matter. Novaxia R specializes in the transformation of offices into housing. Sofidy Convictions Immobilières is a fund of funds, diversified in several types of real estate assets. Perial offers an environmental orientation with Perial Euro Carbone. Older, Capimo by Primonial, with more than €6 billion in assets, has a diversified profile and a history of annual returns close to 4%.
The proven appeal of real estate, even in times of crisis, gives advantages to these media. They provide savers with arguments to compensate, in the multi-support part of their contract, for the low return on their funds in euros, without placing themselves at the level of risk of equities.