Final Word: ‘It pays to be well strapped into the roller-coaster’

Writing a column with any reference to geopolitics is something of a hostage to fortune. As I embarked on this one in mid-December, I wondered what the ‘leader of the free world’ would have announced between then and now via unhinged ramblings on Truth Social. As the final opportunity for editing approached, the (now former) president of Venezuela found himself unexpectedly in a New York jail and the very much still-in-place president of the United States was running off a list of countries he rather fancies taking over.

The 2026 edition of the ULI/PwC Emerging Trends in Real Estate Europe report was published in November. It is a consensus survey of 1,276 senior professionals in the real estate industry. This year, the key concerns of the industry were not the traditional worries about market liquidity, inflation and interest rates, but rather international political instability and escalation of global conflicts. “We are operating in an environment where we regard volatility as a feature, not a bug”, was one of the comments in this year’s report – an observation from a global fund manager. Something that is usually a source of stress in public markets is increasingly making its presence felt in private ones.

There are two approaches to addressing significantly increased volatility. One, is to invest very opportunistically to take advantage of the short-term cycles, embracing the unpredictable. The other, is to invest on a much longer-term basis, to invest through cycles for structural growth, to ride through the unpredictable. 

This is not unique to real estate – we have seen a surge in the number of evergreen funds across private assets. But for real estate this is an evolution of an existing model rather than a radical new invention. Open-ended funds have existed in real estate for decades. The current, more ‘semi-liquid’ model was a response to the lessons learnt from the global financial crisis. Increasing volatility, while increasing the attraction of open-ended funds, also increases the challenges. It pays to be well strapped into the roller-coaster to still be there at the end of the ride.

Institutional investors have long recognised the trade-offs between liquidity, volatility, performance and risk. Although investors may take a view on volatility and liquidity risk on an individual basis, since the global financial crisis, regulators have become increasingly concerned by the potential for systemic risk. The Financial Stability Board (FSB) is the international body that monitors and makes recommendations about managing systemic risk in the global financial system. It sits alongside the International Organization of Securities Commissions (IOSCO), the global regulator of regulators. IOSCO sets guidelines for implementation into local regulation by national regulators. IOSCO is currently running a consultation on valuation for open-ended funds.

Added impetus for an enhanced regulatory framework is driven by the changing nature of the investor universe. Traditional institutional capital is at best stagnant and in many places in decline. It is slowly being replaced by new forms of institutions – for example, the transition in the UK from defined benefit to defined contribution pension provision. Many large investment managers are also expanding distribution through private wealth channels. Opening up investment in private assets to new sources of capital is a valuable step, but it is important that investors understand enough to hold their nerve if the markets hit turbulence.

John Forbes is an independent consultant advising real estate investment managers, investors and others in the real estate industry. He previously worked for PwC for over 25 years where he led its real estate practice