While there’s still a strong case to be made for real estate as an important asset class, many institutional investors are grappling with concerns about property’s proper place in their portfolios, more than two years after the onset of the global financial crisis. Many investors are rethinking their strategies, more aware of the implications of their size, capabilities and short- and long-term goals. To invest smarter, they are seeking greater understanding of and control over various aspects of their real estate holdings, and are determined to implement lessons learned and avoid a highly unpleasant repeat of history. Now is also likely the perfect time to take advantage of opportunities that may not come around again.
From the Current Issue
The commercial real estate recovery that many investors hoped would take root has now started in earnest. Prime assets in core markets have led the way with strengthening occupancies, diminishing concessions and rising rents. The signs pointing to this recovery have not gone unnoticed, as evidenced by last year’s re-emergence of equity and debt capital and the pronounced decline in initial yields.
The chaos of the financial markets’ implosion and the ensuing Great Recession has subsided, although significant uncertainty remains. Now that many economies around the world are showing slow but sustainable growth and liquidity has returned to the commercial property markets, investment managers around the globe are moving to shore up their portfolios and also take advantage of favourable buying opportunities and low interest rates.
While attending conferences in Asia, I happened to come across an interesting topic presented by one speaker in Beijing: The rapid growth that China has been experiencing in the past couple decades has brought a lot of changes to a once “harmonious” society where wealth and social benefits were once equally distributed to all citizens.
Nearly every pitch book contains the same basic disclaimer: “Past performance is not necessarily indicative of future results.” Yet investors continue to analyze managers’ track records as one way to identify strong future performers. And managers continue to claim top-quartile performance as a way to attract capital. Is this a worthwhile exercise? Or are there simply too many variables for fund-level performance to be useful?
In first quarter 2011, Australia’s Future Fund further increased its real estate, private equity and infrastructure portfolios, with overall assets rising to A$74.62 billion during the quarter.