INREV: Quality of underlying assets drives investment strategies in non-listed real estate funds
Tuesday 13 March 2012
Investors at INREV’s recent Cannes Seminar on the growing menu of alternative non-listed products said that the quality of underlying assets is the key driver behind their non-listed real estate investment strategies.
Investor interest in alternative products – such as JVs, club deals, real estate debt funds and infrastructure funds - has soared in the wake of continuing economic turmoil. But investors still consider assets ahead of the type of alternative product they select to invest in.
“Alternative products are firmly on investors’ radar. But the fact that they are mostly focused on the underlying assets is an interesting insight. It demonstrates where investors’ priorities really lie,” said Matthias Thomas, CEO, INREV.
Need for greater clarity
In its recent report on the subject, INREV highlights the need for greater clarity around the plethora of alternative non-listed products. At the moment the industry lacks a common understanding of these products. And while JVs and club deals are nothing new, there is a perception that they are relatively opaque. This could set the non-listed funds industry back in terms of its drive to increase transparency and corporate governance.
Additionally, increased interest in these products could cause an imbalance in the market. Smaller investors may be left out in the cold as growing numbers of their larger peers opt to co-mingle in JVs, which are seen as offering advantages in terms of increased control and greater alignment between co-investors.
Striking a balance
But while JVs continue to attract attention, traditional non-listed real estate funds remain popular. Nearly 36% of delegates at the INREV Cannes Seminar foresaw investors selecting non-listed funds as their preferred method to gain exposure to real estate in 2013. In the same vote, JVs and club deals were chosen by only 20% of delegates.
Lack of expertise
One of the key issues for JVs is lack of expertise. 41% of Seminar attendees cited the lack of necessary investor resources as a main disadvantage for investing in these products. It is an issue that is equally applicable to many other types of alternative non-listed products.
The recent surge of interest in alternative non-listed products has also caught many fund managers off-guard leaving them unable to provide investors with a satisfactory track record in these products.
Commenting on the report, Patrick Kanters, Managing Director Global Real Estate of APG Asset Management added: “Understandably, some investors are asking questions about the type of investment products that suit them best and that’s why we’re hearing more about joint ventures, club deals, real estate debt funds and infrastructure funds. INREV has an important role in leading this debate, not least because all these alternative structures should be bound by the same rigors and disciplines of governance and transparency that apply to traditional non-listed funds.”