Bill Tresham, who leads Ivanhoé Cambridge, which is the real estate arm of Canadian public, private and insurance fund manager Caisse de dépôt et placement du Québec, expects institutional investors' increasing allocations to real estate to continue. But investment managers must remain disciplined when deploying capital despite feeling the heat to get cash out of the door, he said at the PERE Europe Summit in London on Tuesday.
“I think the capital is here to stay,” said Tresham, who was the keynote interviewee at PERE's flagship event in Europe. “Allocations to real estate will stay higher than they have been in the past, that's for sure.”
He added that Caisse de dépôt, which had net assets under management totaling C$248 billion (€171 billion; $194 billion) as at December 31, 2015, has around 11 percent allocated to real estate, but going forward will want to increase that to around 15 percent.
But, in a market awash with dry powder he cautioned that investment managers must be disciplined when putting capital to work. “You cannot manufacture activity. There is a lot of capital around but you can't be an idiot,” he said. “We don't get paid for [transaction] volume, we get paid for returns.”
He added that lessons have been learned from investing just before the global financial crisis and that those that have the “battle scars” will be in a good position to invest wisely, even as many markets reach their cyclical zeniths.
“All are nervous today because we are paying higher numbers. But, if you look at all the other things there are still deals that stack up,” he said.
Founded in Quebec in 1953, Ivanhoé Cambridge holds interests in close to 500 properties, consisting primarily in office, retail, residential and logistics real estate through various subsidiaries and partnerships.