EUROPE – Fund managers who neglect economic trends to focus on real estate specifics will not survive in a market dominated by investors used to thinking in macroeconomic terms, according to Paul Vosper, COO at Morgan Stanley Alternative Investment Partners Real Estate.
In an interview with IP Real Estate, Vosper said perceptions of "good" investment had shifted from financial engineering before the crisis to asset-level expertise in recent years.
Although he welcomed the shift in focus to real estate fundamentals, he described it as "no longer sufficient" in an investment environment where economics determined whether a market sector was attractive.
Instead, fund managers would have to focus on incorporating macro factors including sovereign and political risk into their investment strategy and risk management.
According to Vosper, the best fund managers are already weighting the US fiscal cliff, the euro-zone crisis, inflation, currency risk and slow employment growth within their investment strategies.
Just as important are long-term issues such as demographics, the changing economic balance of power and green issues, he said.
"The old days of just being a bricks-and-mortar fund manager are over," he said.
"It is not just about the quality of the property, tenants, rental values and cap rates anymore.
Fund management requires a more sophisticated level of investing."
Demand for more sophisticated macro-orientated strategies is coming from end-investors used to factoring into their strategies broader economic trends.
"End-investors have always been more attuned to macro issues," said Vosper.
"The CIO is receiving information all the time about markets — whether they're from the equity, fixed income or hedge fund portfolios — and they're always asking questions.
"To raise capital in this market, managers need to be able to answer them with knowledge and conviction."