Moving on

GPs who stuck to their investment script but still got caught out by market events should not be blamed, according to one LP at a recent PERE roundtable discussion in London.

As any actor will argue, he shouldn’t be hastily blamed for a poor movie if he stuck to the script. So too for a general partner, one might say.

Encouragingly, this was the message from one limited partner at a recent PERE European Roundtable discussion in London.

There shouldn’t be a rush to criticise performance owing purely to market events.

Our LP guest – Brendan O’Regan, senior property manager at Ireland’s National Treasury Management Agency – argued that if managers had adhered to the fund strategy that was articulated to investors when they entered the fund, and deployed capital in line with that strategy, there shouldn’t be a rush to criticise performance owing purely to market events.

Instead O’Regan stressed blame should only be levelled at GPs where they had deviated away from an agreed strategy and where a GP’s own behaviour had contributed to declining fund performance. Investors, he said, should not be critical of a strategy that just “didn’t work out”. What mattered now, O’Regan went on to argue, was how managers behaved next.

If this sentiment is common to most investors that constitute the European LP base, his comments are a symbol of a new harmonious accord and are very welcome indeed.

It is a ray of light amid some of the gloom that persists in the region and hopefully will go some way to offset the current uncertainties surrounding real estate fundamentals and the scale of opportunities to be had in the asset class.

What mattered now … was how managers behaved next.

Sure, the four envoys of organisations involved in PERE’s European Roundtable – which also included Edmund Craston, managing director at Rockspring Property Investment Managers, Brendan Jarvis, head of EMEA Real Estate Group at Barclays Capital and Harin Thaker, chief executive officer of Real Estate Finance International at Deutsche Pfandbriefbank – expressed some uncertainly at many of the things going on, not least macro-economic risks and a log jam among banks needing to divest troubled assets. However, the hope that LPs can move on was certainly heart warming.

To borrow from the movie world once more, an actor – the GP if you like – might only be as good as his last movie, but there is always the prospect that the next picture could turn out a box office smash.

So long as he is only a victim of outside events and not behaviour, he should be given another chance. Let’s hope that the current crop of movie stars out there can deliver.

To read the full report from the PERE European Roundtable, see the March issue of PERE.