IPD/IPF CONFERENCE: Fund managers must stop focusing on “short-term cyclical growth” and look instead at how they can tap into global mega-trends such as urbanisation and globalisation, said Mike Sales, European managing director, TIAA Henderson Real Estate.
Sales, speaking at a panel discussion on meeting the challenges of the new real estate cycle, said that increased regulation in the wake of the global financial crisis meant that funds were taking longer than ever to set up, with the result that new vehicles often missed out on short term-term opportunities for capital value growth.
“If you spent the past 12 months trying to set up a fund, you will have missed out on an 18% total return,” he said.
He added that real estate funds were facing an “agility challenge” as real estate cycles became “shorter and sharper than they have ever been”.
“Property is absolutely flavour of the month with investors, but regulations such as AIFMD and Solvency II are having a severe impact on the industry. The sheer weight of compliance and bureaucracy means that it is hard to get new vehicles set up quickly,” he said.
The industry should therefore pay more attention to global mega-trends that will drive property performance over the longer term. These include urbanisation in emerging markets, the growing importance of the tech sector in shaping occupier demand, and the changing needs of ageing populations.
“As an industry, we should be hiring fewer economists and more sociologists in future in order to understand the impact of these shifts. We also need to seek out investors who see property as a long-term hold, who will not leave the market at the first sign of instability,” he said.
Other panelists felt that regulatory burdens continued to constrain the development of the fund management sector.
“We are seeing fewer entrepreneurial fund managers coming out of larger houses and setting up on their own. They are stifled by bureaucracy,” said Noel Manns, co-founder of Europa Capital.
He added: “We are likely to see more consolidation in the sector.”
Independent consultant John Forbes said: “We are in a window of ‘unique badness’ from a regulatory standpoint. New legislation has been introduced and is starting to bite, but the industry is experiencing a lot of teething troubles.”
