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Investors avoiding real estate, equities due to Solvency II uncertainty – Invesco

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EUROPE - The uncertainty surrounding the ongoing Solvency II debate is putting many investors off real estate and equities, according to Invesco.

The new solvency regulations, which are to come into effect for insurers across the European Union from 2013, are still under discussion, and some details - such as the buffer requirement for certain investments deemed risky - are not yet fully clear.

Robert Stolfo, director of business development at Invesco Real Estate, said: “Solvency II is dampening interest in real estate investments among insurers.”

He said the question of risk margins for real estate and equities had not been answered and that, for many investors, current estimates were unattractive.

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He said large investors, if they were investing, were more interested in sector-specific investments to fill their core-satellite strategy, based mostly on a direct real estate portfolio.

“Pan-European funds are mostly in demand by pension funds that are still looking for a basic real estate exposure,” he added.

Luke Stellini, product director for European equities at Invesco Perpetual, also sees the protracted Solvency II debate as a problem.

“Once all questions around Solvency II are cleared up, this will push equity demand,” he said.

Stellini said he currently saw only cautious interest in European equities, despite the market being “mostly cheap” and offering more potential for “positive surprises” than emerging markets.

What is more, he said fears of a double-dip scenario or the crashing of the euro-zone, which had given investors reason for pause last year, had now been pushed down the list of concerns.

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