What should an investment manager do when faced with the problem of buying an asset that suits the criteria of two or more of its investors? Reduce the human subjectivity element when determining which investor gets it.
That is the approach at Deutsche Bank’s real estate investment management business, RREEF. Manager of numerous separate accounts within its $56.5 billion global portfolio, the firm operates a rotation policy to determine where to place an asset in the event of competing investor criteria. Niel Thassim, RREEF’s head of Asia-Pacific, outlined the procedure while talking PERE through the KRW500 billion (€315 million; $460 million) separate account mandate it won from Korea’s largest insurer, Samsung Life Insurance, which was announced last month.
The sizeable mandate win by RREEF was the latest in a string of big-ticket separate accounts recently attracted by the firm and brought its total capital under management from Asian investors to more than $3 billion. Last year, RREEF won mandates from Malaysia’s Employees Provident Fund and its KWAP Provident/Pension Fund, which sit among others from Korea and Malaysia as well as Australia, Hong Kong, China and Japan.
Samsung’s investment strategy of acquiring assets between $200 million and $300 million in size in core markets around the world means it is unlikely to face competition from other RREEF accounts but, in the case of such a situation, the rotation policy would come into play.
Thassim explained: “When a deal comes to our investment committee, we look at it agnostically on behalf of all our clients before identifying which client’s criteria the deal meets. For a mandate like Samsung, there aren’t many clients that can trade at that size, so it can be very clear if a deal should go to them.”
“However, there are occasions where a deal would meet multiple clients’ criteria, so they are placed in a rotation queue. The client highest in the queue at that particular point in time gets first right of refusal on the deal. If they accept, they move to the bottom of the queue. If they don’t accept it, the deal is referred to the next client in the queue.”
Thassim explained that all RREEF clients are informed of the rotation policy before signing off on mandates, and full transparency on the status of the firm’s deals is maintained at all times. He said: “If you want to be a fiduciary manager acting in the best interests of your clients, you can do it one of two ways. Either have just one client – no competition there – or do something completely transparent, where there really is no decision to make.
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