How long-term investors are managing short-term disruptions

Institutions vary in how much they prioritize their long-term strategies when considering shorter term risks and opportunities.

Amid the current market volatility and uncertainty, investors have different approaches to managing shorter term risks and opportunities while maintaining longer term strategies.

George Agethen, co-head of Asia-Pacific at Ivanhoé Cambridge, the real estate subsidiary of Canadian pension plan Caisse de dépôt et placement du Québec, said his organization reviews its longer term strategies every year to account for shorter term disruptions such as the covid-19 pandemic, inflation and the Ukraine war.

“We try to be as agile as we can,” he said, speaking on an investor panel at the 2023 PERE America Summit in Singapore last week. Agethen noted that longer term mega trends are more demographics-driven in Asia and therefore do not change too often, but that shorter term opportunities will shift.

“Maybe specific transactions become more attractive at a different point. We’re certainly very focused on investments where the income would try to track inflation.” Such investments include those in alternatives sectors and highly operational assets, as opposed to more stable, core investments that are seeing cap rate expansion.

George Agethen PERE Asia
Agethen: opportunistic investments should still fit into the long-term investment strategy

Ivanhoé Cambridge also has a sleeve for more opportunistic-style investments to “take advantage of moments of dislocation like we have today.” One such opportunity is in the listed market, which is currently undervalued, as well as debt, where the lack of liquidity offers the potential for excess return. “But I always weigh that with the team as to how short term is it and is it actually playing into longer term trends where we have a high conviction?” he noted. “As much as you want to be opportunistic, it’s opportunistic into a longer-term strategy.”

Jiroo Eoh, head of the alternative investment department at South Korea’s ABL Life Insurance, however, is more focused on short-term investments than longer term strategies at the moment. He explained that last year the finite nature of Korean insurance capital became apparent as interest rates began to increase. After policyholders then transferred their money to higher-returning strategies, ABL faced difficulties in raising new money to replace the capital outflows, and the new funds came in at a higher cost.

“From our perspective, we want to recycle the capital in a short-term strategy, and within the short-term strategy, we think the real estate debt sector will be most appropriate at this stage,” Eoh said, noting that debt investments provide higher returns while offering good liquidity.

“Yes, it is important for companies like us to see and do investments for the longer term. But at this stage, what we’re currently focusing on is 24-36 months of investments.” These include short-term loans, construction loans and refinancings in the logistics and residential sectors.

Stephen Tross Bouwinvest PERE Asia
Tross: long-term strategies need to be able to weather short-term disruptions

Meanwhile, Stephen Tross, chief investment officer of international investments at Bouwinvest Real Estate Investors, said short-term risks need to be built into a long-term investment strategy. “The most important thing to mitigate risk is having a long-term investment strategy that can weather short-term interruptions,” he said.

For the Dutch pension fund manager, such a long-term strategy entails investing in sustainable, liveable metropolitan areas “where people want to live, work and play for the longer term” and that are supported by strong demographic trends and a good supply-demand balance. “That for us, is the biggest risk-mitigating factor,” Tross said.