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since the first batch of products were launched in june 2021, my country's public reits have initially experienced a complete cycle - becoming popular in 2022, experiencing a significant correction in 2023, and now developing steadily. in promoting the high-quality development of the public reits market, the active participation of patient capital is crucial. at the china reits development 2024 annual conference recently hosted by rise real estate financial research institute, participants conducted in-depth discussions on further improving the various mechanisms of public reits and attracting patient capital.

insurance funds and reits are naturally matched

yang mingsheng, former chairman of china life insurance (group) company, former vice chairman of the china insurance regulatory commission, and member of the standing committee of the 13th national committee of the chinese people's political consultative conference, said that the reits market currently has problems such as limited market size, insufficient product liquidity, and insufficient long-term stable high-quality assets. simplify the fundraising process, reduce leverage ratio restrictions, while accelerating the listing of more traditional and new asset formats, and increase the enthusiasm of patient capital to participate in the reits market.

high-quality infrastructure projects of public reits are scarce assets and can generate stable cash flow. insurance funds have long duration and cross-cyclical properties. they are typical "patient capital" and are a natural match for reits.

since the listing of the first batch of publicly offered reits, insurance funds have used reits products as strategic assets to conduct a comprehensive layout, and have continued to increase their participation. as of the first half of 2024, insurance institutions accounted for the highest proportion of participation among all non-original equity holder allocation investors, about 20%, and a total of 34 insurance institutions have participated in the allocation. among offline investors, insurance institutions accounted for more than 30%.

xu lisi, general manager of the real estate investment department of china post life insurance co., ltd., said that the mandatory cash distribution mechanism of reits can ensure that patient capital can continue to share the benefits of asset operations in the long term. in the first eight months of 2024, 32 reits have been distributed a total of 60 times, of which 19 have been distributed more than once, providing investors with predictable cash returns. on the other hand, the return on the amount available for distribution of reits is relatively high. the market capitalization weighted average return on the amount available for distribution of 28 reits with four quarters of historical data is 7.1%, which is very attractive compared to other assets with cash distribution. force.

xu lisi also said that reits have become an important exit channel for infrastructure projects, which has broadened the investment scope of patient capital. high-quality infrastructure projects in many industries have good investment value, but they lack liquidity in the bulk trading market and are difficult to exit, which makes many patient capitals worried. "as for affordable housing, consumer infrastructure, and factory projects, due to publicly offered reits provide better liquidity and exit channels, so they have received high attention from the market and are favored by a large number of investors."

“the strict compliance requirements and more transparent information disclosure of reits products also provide convenience for patient capital investment.” xu lisi said, “compliance judgment and post-investment management are areas that patient capital and other institutional investors attach great importance to. , reits have good institutional arrangements in these two aspects, which can reduce the corresponding time cost and human investment of patient capital, and focus more on investment and research.”

suggestioncompleteasset pricing and other mechanisms

however, there are still many obstacles in the public reits market in attracting patient capital, including insurance capital.

“at present, some insurance companies’ investments in publicly offered reits products are subject to greater solvency constraints. if the risk factors of investing in reits are still high, it is recommended to further solve the pain points and difficulties of corresponding fund investment and increase their investment willingness.” yang mingsheng said, “at the same time, "it is recommended that important strategic investors be given more participation rights and information rights, such as being allowed to participate in issuance pricing, fund decision-making committees, advisory committees or setting up observation seats to increase the enthusiasm of strategic investors to participate in investments."

according to industry insiders, mechanisms such as continued market expansion and promotion of reasonable asset pricing are also crucial for patient capital to enter the public reits market.

qu yan, head of the financial product investment department of taikang asset management co., ltd., said that expanding the number of underlying assets held by reits can effectively reduce the impact of single asset fluctuations. reits hold fewer underlying assets per target, and it is easy for reits to fluctuate due to accidental fluctuations in the performance of a single asset. on the other hand, the expansion of assets is also conducive to forming a high-quality asset portfolio of leading reits.

"on the whole, we still hope to further accelerate the expansion of reits and promote the regular expansion of more reits. in particular, for projects that are under review and approval, it is recommended to shorten the approval cycle for expansion." qu yan said, "during the expansion process, for patient capital that focuses on allocation strategies, the biggest challenge may be that it can only passively accept the expanded assets. it is recommended to introduce a valuation adjustment mechanism similar to the initial offering to avoid issuance difficulties caused by excessive valuations as the market changes. rise."

can attract international investors to enter the reits market

as an innovative financial tool, reits play an important role in promoting technological innovation, industrial upgrading and green and low-carbon transformation by revitalizing existing assets and providing long-term and stable financial support. with the improvement of market systems and mechanisms in the future, reits will have broader room for development.

"from a global perspective, reits are an important part of asset allocation, with the characteristics of stable long-term returns and more diversified risks." zhao yonggang, general manager of the research and development department of csi index co., ltd. said, "as an important tool carrier, reits index and index chemical products are also developing rapidly. currently, csi reits (closing) index and csi reits (closing) total return index have been released.

zhao yonggang revealed that the next step will be to focus on large-capitalization reits index, sub-category reits index, and reits strategy index that captures abundant cash flow, high dividends, and low volatility. we will continue to enrich the reits index series, help build the reits investment ecosystem, and promote the reits market. high quality development.

andrew robb, the former australian minister of trade and investment, suggested that china could consider introducing foreign reits to provide new perspectives and strengthen tax incentives on the investment side, thereby attracting more international investors to enter the chinese reits market.