German alternative investment fund manager Intreal said it boosted its assets under management (AUM) by nearly 12% in the first half of 2022 but warned that growth will slow in the second half as inflation and higher interest rates start to bite in earnest.
The Hamburg-based firm lifted AUM by around €6 bn to €57.2 bn in H1 from €51.2 bn at end-2021. Of this increase, the bulk (€3.5 bn) was added in the first quarter.
Intreal added 11 investment funds to its stable over the first six months, bringing the total number of vehicles under its administration to 283.
The fund manager also hit the hiring trail during the period, recruiting 51 new employees at its offices in Hamburg, Frankfurt and Luxembourg, to bring the total number of staff on its payroll to 452.
Intreal managing director Michael Schneider said much of the growth in AUM over the first half stemmed from transactions initiated in 2021, but cautioned that business would weaken in the second half as adverse macroeconomic effects took hold. Signs of this were already being seen in a decline in transaction activity, he said.
‘During the first half-year 2022, the degree of uncertainty jumped up in all economic sectors. Even the real estate segment was unable to steer clear of the situation. Unusually high inflation rates, significant interest rate hikes, and exploding construction and energy costs have impacted the sentiment in the industry. With this in mind, I find the growth by c. 6.0 billion euros all the more reassuring. It is explained by a large number of investment funds and transactions that we initiated together with our fund partners back in 2021. So, we are still riding on the tailwind of last year to some extent.
‘We expect the growth to slow down during the second half of the year. The adverse effects will begin to be felt by then. For instance, we have noted a decline in the number of transactions. Moreover, the new business volumes in all of our divisions experienced a slower growth during the second quarter than the pace still seen during the first quarter.’
Nevertheless, he said he remained ‘cautiously optimistic’ about the longer-term future. ‘The industry will get used to the new normal. It knows how to handle a level of interest rates permanently higher than it used to be.’
Real estate’s characteristics offered protection from inflation in times of crisis, he noted. ‘The inflation protection and wealth preservation aspects of real estate were sort of relegated to the background in recent years. With the changed situation now, however, especially commercial properties with their indexed leases are a reminder that real estate can, to a certain degree, protect you against inflation, and that it offers stable asset value in volatile times while generating continuous cashflows on top of it. And active management is a key prerequisite for making a success of it.’
