REAL ESTATE – Stichting Pensioenfonds ABP, the €200bn Dutch civil Service scheme, has decided not to invest in Russian real estate but is currently enacting deals in Mexico and Brazil.
Speaking at the PropInvest Europe conference in Barcelona last week, ABP senior portfolio manager Rob Bingen said: “Ongoing issues which we’ve been studying in Russia are just too great to overcome.”
However, he said transactions in Mexico and Brazil were in progress and the pension fund was also close to opening an office in Asia. The latter continent, he said, had a big part to play in his fund’s future investment plans.
Bingen said ABP’s desire for control made joint ventures with local operators a favoured form of investment. “We like to make the decisions but finding suitable local teams is difficult.”
Although ABP has significant holdings in private fund vehicles Bingen said it was not a fan of these vehicles because control tended to be in the manager’s hands rather than the investors. “Obviously it is important that the manager has the power to make decisions,’ he said, “we understand this but the situation is still not ideal for us.”
Bingen was very supportive of global (real estate) equities and dismissed the criticism of price volatility as “almost irrelevant to long-term holders such as ourselves”.
“Sooner or later the prices will relate to net asset value.”
In answer to a question from a delegate, Bingen agreed that ABP was likely to reduce its exposure to Europe in future in favour of Asian, North American and South American holdings.
In regard to the US he said he was not optimistic about returns from core holdings and was instead looking at niche markets such as student housing, retirement housing and urban infill developments.
He anticipated the European market for commercial mortgage-backed securities would grow rapidly in line with the US experience and was enthusiastic to be part of it. He was more cautious about derivatives, with apprehension about pricing.
However, in concept he thought derivates were an excellent portfolio tool and hoped that the market would develop.
ABP’s real estate holdings are worth around €18bn – or 10% of total assets. But this figure does not include a 3% allocation to infrastructure assets which Bingen is very bullish about.
ABP has decided not to manage this asset class within its real estate portfolio. Alongside real estate, infrastructure forms another component of ABP’s 20% allocation to alternative assets, the balance being made up by things such as hedge funds and commodities.