Real estate attractions explored
Delegates to the first IPE Real Estate European Investor Forum, held in Barcelona last month, gathered to hear some of the leading lights of the real estate industry talk about current issues, global real estate markets and the investment options open to pension funds.
The one-day event was organised by IPE’s sister publication IPE Real Estate, in association with Euromoney Investor Shows. It offered European pension funds a chance to learn more about the asset class and to discuss it with their peers. A broad church of delegates included large funds, such as ATP, which already have significant real estate investments, to smaller funds with no current allocation.
Speakers at the event included David Bradford, managing director of Pramerica Real Estate Investors, who spoke about the role real estate can play in a pension fund’s investment strategy and Robin Goodchild of LaSalle Investment Management, who outlined the prospects for a number of global real estate markets.
Delegates also heard from their peers. Representatives from Dutch pension fund ABP, Irish Life and Danish public pension fund ATP took part in a panel discussing the best methods for benchmarking a real estate portfolio. And Esbjorn Wincent, head of alternative investments for Folksam, described how his fund had developed a new strategy to diversify its real estate investments by investing in a pan-European real estate fund-of-funds for the first time.
Of the 50-odd pension funds representatives present, more than 50% said they planned to increase their real estate allocation, while 30% were from pension funds with no current allocation which were considering investing in real estate for the first time. Only one fund said it planned to cut its real estate allocation.
Richard Balfe, of the MEP’s Pension Fund in Brussels, said: “We found the event very useful and it was good to meet people in a similar position to us. We’ll look at real estate more favourably in the future.” The MEP’s fund currently has minimal real estate investment through real estate securities, but Balfe said it would consider a wider range of options now.
Hooman Kaveh, chief investment officer of Irish Life’s pension fund, which only has £35m invested in real estate unitised funds, said: “I came to to see what the options were for investing in real estate across Europe. We are always looking to spread our wings and look outside the small home market. I’m not sure whether I will want to invest as a consequence, but it’s been interesting hearing what the real estate industry has to say.”
Mads Rude, portfolio manager at ATP, which has €1.5bn invested in real estate both directly and through unlisted funds, said the fund planned to increase its real estate allocation to take further advantage of the asset class’s high income yield and stable returns. ATP is looking to diversify out of its home market by investing in unlisted real estate funds across Europe. It has investments in 12 funds.
Many of the delegates showed particular interest in real estate investment trusts. These tax-exempt listed real estate vehicles allow investors liquid access to real estate and pay a much higher dividend yield (up to 6%) than other stocks. REITs, which were pioneered in the US and Australia, tend to track the real estate market more than they track the stock market.
Jon Finnbogason, an asset manager at Icelandic fund Frijalsi Lifeyrissjodurinn, said: “Learning more about the different types of indirect investment, such as REITs, has made me more likely to invest in real estate.”
A real estate asset allocation game asked the audience to decide the best way to allocate a brand-new €500m allocation to the asset class. Delegates made initial choices based on their existing knowledge and then heard about a range of real estate investment options.
REITs proved to be one of the most popular sectors for investment and was the sector which saw the greatest increase in popularity (up about 25%) after delegates heard more about it.
IPE Real Estate will be holding a UK Investor Forum on 21 June this year.
Mark Cooper is the editor of IPE Real Estate