Prudential and Blackstone's recent acquisition of £12bn of buy-to-let assets from UK Asset Resolution represents another move towards great portfolio diversification of the real estate assets held by larger life offices.

Clearly, life office general accounts are no strangers to real estate investing, although with the notable exception of equity release portfolios (typically used to back annuity liabilities) the focus has commonly involved commercial real estate assets, as the issues involved in rating and securitising more granular residential portfolios have on occasion proven difficult to overcome.  

However, the search for high quality illiquid credit continues - particularly in structures which have the capability to offer a range of maturity profiles.  A variety of new approaches have moved life companies towards greater exposure to the residential category: ground rent securitisation, social housing based projects involving a mixture of debt and equity participation with developers, and urban regeneration initiatives are recent examples. 

Meanwhile, life companies are becoming increasingly adept at scrutinising, rating and manufacturing more granular debt categories for inclusion in their investment portfolios.  In the UK at least, bank retrenchment remains an important investment theme...