Why has Germany's largest pension fund awarded seemingly identical global property mandates? Richard Lowe investigates.
The €500m global real estate mandate awarded by Germany's BVK last week was a vindication of CBRE Global Investors' decision to reorganise its separate accounts business. But what is perhaps more interesting is that the mandate looks identical, on paper, to the €500m mandate it awarded to LaSalle Investment Management earlier this year.
In March, CBRE Global Investors announced that it had reorganised its separate accounts business in a way that would "enable single and multiple-country separate account mandates to be managed in a more streamlined organisation". Speaking last week at Expo Real, Peter Helfrich, head of Germany, suggested the reorganisation had been instrumental in winning the business. He described the mandate as a "game changer", both in terms of its being CBRE GI's first truly global mandate and its standing in the German institutional market.
Bayerische Versorgungskammer, Germany's largest public pension group and owner of more than €60bn in assets, has sought to boost its exposure to global real estate markets over the past two years. The two €500m global mandates awarded to CBRE GI and LaSalle come nearly two years after the BVK awarded another €500m mandate to UBS Global Asset Management with the aim of building a global property fund of funds portfolio. That €1.5bn commitment to global property will be adding to an existing, sizeable domestic property portfolio managed in-house and a pan-European core strategy managed by Invesco Real Estate (not counting a burgeoning property loan book in Germany).
There is a clear distinction between the BVK's latest mandate and the one awarded to UBS Global Asset Management. The latter aims to provide the investor with exposure to value-add and opportunistic risk profiles and investments in, among other things, alternative property sectors and development through indirect fund investments.
The CBRE GI and LaSalle mandates, on the other hand, will make direct property acquisitions with a core/core-plus risk profile. So what is the distinction between the two? On paper, there does not seem to be one.
Norman Fackelmann, head of real estate investment management at the BVK, told IP Real Estate the institution had awarded similar mandates within a short period of time to "increase the real estate investments". He also pointed out that the mandates served different versorgungswerke (the BVK is effectively a conglomerate of versorgungswerke, which are retirement plans for self-employed workers).
But Helfrich admitted there was scope for overlap on both mandates. They are both structured as German Spezialfonds, which means all deals will need approval from the BVK. Helfrich said there was every possibility both CBRE GI and LaSalle would "come up with the same deals" as they scoured the global markets for opportunities.
But the potential for overlap may be seen as largely a positive rather than a negative. Employing two investment managers with global reach will increase the number of opportunities available to the BVK.
But Helfrich also said such an approach would enable an easier comparison of managers as the mandate is carried out. "How is this manager functioning and is he really performing?" he asked. "Does he bring me the right deals? Does he do the right asset management? If you have different managers in different sectors, it is hard to compare as well."
Helfrich said this was a "new feature that you see more and more going forward" in relation to larger investors. "They have managers doing roughly the same products for a client."
Given the broad geographical scope of both mandates, CBRE GI and LaSalle are likely to construct portfolios with both similarities and differences. The differences will be driven by their in-house market views and the way in which they put their research and strategy into practice in the market.
However, from a global, top-down perspective, it is likely that both managers will have identified some of the same markets as having the best opportunities in the current point in time. When the LaSalle mandate was announced, for example, Claus Thomas, international director, said the investment manager was "seeing attractive opportunities in Asia, notably Japan", as well Canada, Australia and the US. Helfrich said last week: "Right now, we are looking at properties in the US and A-Pac, and that's mainly Korea, Australia and Japan."
But Helfrich also said CBRE GI would build up a portfolio that took into consideration the BVK's existing property portfolio and long-term allocation targets (roughly 40% Asia-Pacific, 40% US and 20% Europe). For example, "from a purely return-driven perception, Europe could be more interesting than the US at the moment", Helfrich said. "But this is really about assets managed through the cycles. This is not really a cyclical play."