Spanish insurance group Mapfre is poised to allocate €1.6 billion ($1.9 billion) to alternative assets by 2023, with a particular eye on real estate bargains in Europe, as it seeks to diversify its investment portfolio and source decent yields in an ultra-low rate environment.

The plans mirror the diversification desire of many life insurers across the world, including those in Asia. Korean life insurance companies in particular appear keen to return to property investments in Europe as soon as conditions permit.  

Joe Luis Jimenez

Mapfre, which has an investible portfolio of €50.3 billion, intends to take advantage of worsening property conditions across core cities in Germany, France and Italy. Chief investment officer Jose Luis Jimenez told AsianInvestor he believes that prices for prime office buildings could fall between 5% and 10% between now and late 2021 as government stimulus measures are withdrawn and building owners, including real estate funds, facing falling revenues are forced to sell.

This desire marks the continuation of the insurer’s strategy to expand its investments into alternatives, to complement its existing €2.4 billion allocations to real estate (€2 billion in direct investments and €400 million via funds).

The insurer’s allocations to alternatives – which include infrastructure, private equity and private debt besides real estate – have increased by €1.1 billion since the beginning of last year – of which €500 million is still dry powder waiting to be invested.

Jimenez estimates that Mapfre will make a further €1.1 billion in new commitments over the next two to three years to infrastructure, infrastructure, private equity and private debt, shifting funds from its sovereign bond portfolio as bonds mature (the insurer also receives between €22 billion and €23 billion in new premiums per year).

Jimenez said the appeal of real estate investments is the income streams the assets can throw off most closely resembles traditional bonds, but provide better yields and returns.

Mapfre has so far focused most of its commercial property investments on offices with blue chip tenants in prime European locations such as Berlin, Paris and Milan, where it typically seeks annual returns of between 2.5% and 4%.

It also directly owns buildings in the US, Latin America and Spain, but none as of yet in Asia.


While Mapfre is expanding its alternative assets, it typically structures its own alternative asset funds to keep fees down. It subsequently appoints investment managers to oversee them, or sometimes co-invests alongside external managers via a specific investment vehicle created for the purpose.

Typically, this approach keeps its fees for alternatives funds between 30 and 100 basis points, said Jimenez.

In many cases Mapfre looks for other insurers, mutual companies or foundations to co-invest in its funds, although it avoids private banks or family offices whose investment horizons do not match its own. The fund has already created several real estate funds in Europe, including a €300 million fund, launched in 2018 with alongside GLL Real Estate Partners (the real estate investment arm of Macquarie Group), where it invests alongside five other insurers, most of them Spanish.

While Mapfre is looking to actively add alternatives, it keeps €28.1 billion of its investible assets in European sovereign bonds, with the largest share in its home country and €9 billion in investment grade corporate bonds. In addition it has €2.3 billion in equities, €1.4 billion to mutual funds (excluding real estate funds) and the remaining €7.1 billion spread across cash, unit linked and other investments.


In addition to seeking out alternatives for more return, Mapfre aims to invest more into higher yielding sovereign bonds, especially those of Spain and Italy instead of buying into high quality corporate bonds such as those of Germany automaker BMW. Jimenez said this is because the sovereign bonds offer a better balance between risk and return.

In March when bond spreads widened, the insurer increased the credit quality in its sovereign portfolio, shifting roughly 5% of its portfolio from peripheral sovereign bonds including in Spain and Italy to core Europe including Belgium, France and Holland.

Mapfre is fairly self-sufficient when it comes to mainstream investments, managing most of its listed equity and fixed income investments in house, said Jimenez. The only exceptions are where investments are particularly niche, such as into Asian markets such as Taiwan; in those instances, the insurer considers using external managers.

However, insurer is cautious about investing into Asia. Mapfre has a very small insurance business in China, Japan and Indonesia, and so few Asian liabilities to match. While it has a small allocation in Asian equities and bonds, and favours Japan, its regional allocations appear unlikely to grow.

In contrast, it is the largest non-life insurer in Latin America, with businesses in every country in Central or South America except French Guyana. As a result, it has sizeable investments there.

In all cases Jimenez has a strong preference for active over passive management.

“I’m not a fan of passive investing [which] looks cheaper but could quickly become really expensive [owing to lost investment gains],” he said.