All around the world, urgent questions are occurring to limited partners as warning lights flash up on the dashboard.
South Korea’s economic growth has slowed due to weak exports blamed on Europe’s debt crisis. What’s our exposure to Korea and to Asia in general, the LP might ask. Spain’s Bankia has had to suspend its shares. Do any of our underlying managers bank with them? Furthermore, do we have managers that bank in Greece? [Please tell us we don’t!]
Given these investors are asking the questions, it is natural that diligent fund managers are being responsive, in some cases pre-empting questions by getting data together. Still, unlisted real estate is a longer-term game, and all managers can really do is consider the life span of a fund, be that seven or 10 years.
With that in mind, this month’s issue of PERE brings you news and analysis of how players in the market are viewing the longer term. For example, from page 30 onwards, Joseph Azelby, the head of JPMorgan Asset Management’s global real assets group, explains how he has built a $60 billion business on the long-term view that diversity is the only free lunch in investing. He doesn’t talk about the present-day shocks so much as the long view that investors need to move from thinking ‘5 percent real estate and 3 percent infrastructure’ to considering 25 percent in ‘real assets’.
Others that are looking at the longer-term trends are those wishing to be in real estate debt. Given the huge demand-supply imbalance, it is little wonder that institutional investors and general partners want to be in the space, as Evelyn Lee reports starting on page 35. Some of those fund managers eyeing debt are UK-based but, for a deep dive on what longer-term issues are on the minds of professionals operating in England, you can refer to PERE’s UK roundtable, which begins on page 40.
But before all of that, we have analysis on what LPs are doing with their allocations, whether it is the Los Angeles Fire and Police Pensions, the San Francisco Employees’ Retirement System or the California State Teachers’ Retirement System. That’s not to mention the latest on the Volcker rule, which will shape banks and their funds for years to come, and fears about how the forthcoming AIFM directive in Europe could wipe out a generation of smaller fund managers.
However, not everything is about looking forward. There also is room to revisit an old talking point – the unlawful shenanigans of a former Morgan Stanley Real Estate employee in China. For that, I recommend you turn to Jonathan Brasse’s investigative piece called ‘Heart of Darkness’, beginning on page 8.
Good luck to those in the industry and enjoy the issue,