Brexit is causing havoc on the markets but, like all crises, it can reveal opportunities to brave investors, experts said at the AXA Investment Managers – Real Assets forum on 'Capturing value in the real assets world', which was held in London on Tuesday.
'This is a phase that may offer opportunities,' said Isabelle Scemama, head of funds group and management board member at AXA IM-Real Assets. 'We predict spreads widening earlier than previously anticipated.'
Long-term investors are set to benefit the most, said Charles Daulon de Laurens, European head of sales and member of the executive committee: Turmoil can have positive consequences. Brexit and whatever it may lead to could be a point of entry for our investors on the debt and equity side.'
In the meantime, the reality is that the vote has made a difficult situation worse. 'The investment market was already tough before Brexit and now we are seeing heightened uncertainty in the UK and the Continent,’ said Anne Kavanagh, global head of asset management and transactions and member of the board. ‘With instability and volatility ahead, investors are moving into a risk-off, defensive mode.'
As recognition is wide-spread that it is not a good environment to invest in, 'many decisions will simply be frozen,' said Justin Curlow, investment Strategist at AXA IM-RA.
It can be preferable to act decisively and invest, rather than adopting a wait-and-see attitude, and recent past experience can provide some examples. 'In 2010 we took the bold decision to go back into Spain, and bought prime core assets in Barcelona at a yield of 10% at the very bottom of the market,' said Kavanagh. 'That is the reality of investing.' In recent months AXA IM – Real Assets has been buying value-add in Spain and Italy on the back of the recovering occupier market, and has a strong office pipeline in France.
Some investment decisions that AXA has taken in the last twelve months, such as investing in new office buildings in Germany and in France, particularly in Paris, may turn out to be prescient if the much-talked-about 'flight from London' materialises and banks and companies which are now in the City choose to relocate to other cities in the EU.
Until that happens, however, uncertainty will prevail and will dissipate only when there is some clarity as to the UK's new trade agreements and relationship with the EU. As Kavanagh pointed out, 'Brexit is undoubtedly a problem for the UK, but unfortunately it is not good for Europe either.'
Being an international player with €65 bn of assets under management means being able to use geographical diversification to your advantage, said Curlow. A year ago AXA IM Real Assets introduced its 360 degree concept, which involves investing in the four quadrants of property: private direct real estate such as private funds and property derivatives; real estate equities such as listed funds and REITs; real estate private debt (direct lending and balance sheet); and real estate public debt, such as corporate bonds, CMBS and RMBS.
'This holistic approach helps us to better monitor the market and capture value,' said Curlow. ‘When utilising this approach to portfolio construction, investors can achieve superior risk-adjusted returns through the entirety of the property cycle.'
