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IPE special report May 2018

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Hewitt’s Duff attacks real estate managers

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REAL ESTATE - Most real estate fund managers aren't fit for purpose, according to Nick Duff, real estate partner at Hewitt Associates. [This story first appeared on IPERealEstate.com.]

In an interview with IPE Real Estate, Duff said most lacked "the contacts, the systems or the teams" to service UK investors looking to relocate part of their real estate assets in continental Europe.

"Managers need to be able to deliver with their own networks, local offices and access to transactions," he said. "They need a market pipeline, and to be proactive in screening the market for deals.

"All of them pretend they can do it, but two-thirds of them can't."

Nick Cooper, chairman of the Association of Real Estate Funds, supported Duff's claim that "the right connections are fundamental to doing business", though he stopped short of backing his claim of industry-wide incompetence.

"I strongly believe that real estate is a local issue, and understanding local markets essential. There's no substitute for it," he said. "You need to have insight into local market dynamics and culture. Especially in continental Europe, which has less transparent markets than the UK, it's about relationships."

Ubbe Strihagen, Stockholm-based managing director of Aberdeen Property Investors, agreed with Duff that "there are a lot of second-rate fund managers out there", pointing out that intense pressure to place money would lead many fund managers to make bad investment decisions.

Yet he also pointed out that fund manager performance would decline as the focus moves away from acquisition to include property management.

"The market in the UK has been stellar, heavily assisted by the yield shift," he added. "But we've already seen the benefits of the yield shift. In the next three years, the value-add will be generated by active management," he said. "Finding a good deal is one thing, but they need to be able to manage it as well."

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