We return to our desks after a summer of macroeconomic and geopolitical turbulence.
As I write, China’s latest interventionist policy, permitting state pensions to invest in shares to shore up the country’s plummeting stock market, is failing. Following its surprise currency devaluation, these shockwaves from the world’s most populated country are pounding global sentiment already hit by the current oil and commodities demand-supply imbalance, growing doubts about the efficacy of Abenomics and the Greek bailout.
Meanwhile, Europe is facing a migration crisis emanating from Syria’s internal conflict, Russian-Ukrainian tensions remain high, and there’ve been further terrorist attacks, this time in Tunisia and Thailand. Even the Koreas are kicking off again.
How does a private real estate investment business plot its strategy against a backdrop such as this? At our Europe Summit in June, LaSalle’s CEO Jeff Jacobson advised operating without fear while simultaneously maintaining discipline. That’s probably good advice as for every fear factor there seems to be an equal positive indicator to point to. Some are linked. For example, Chinese economic wobbles are causing capital outflows and that is one factor keeping demand for institutionalized real estate elsewhere in the world high.
Nevertheless, jitters are creeping in. One US fund manager told me last month he was desperate to deploy the remaining capital of his latest fund so he can fundraise again and be ‘cashed-up’ for a market downturn. Similarly, a Europe manager told another publication how it was in a “disciplined hurry” to invest. Morgan Stanley’s latest opportunity fund deliberately has a shorter investment period than usual so it can deploy and fundraise again quickly too.
Further, it has become apparent that strategies are converging in focus, leaving less and less to chance. There are instances of opportunistic strategies sounding more like core strategies and we’re even hearing about separate platforms within global firms whose strategies have become so similar they’ve actually sparked internal arguments. The overriding sense is that we’re fast-approaching a pivotal time when some big calls will need to be made, both by investors and investment managers.
For us commentators on the sidelines, the outcome of these calls will lead to some compelling editorial.