Value-add and opportunistic vehicles have not earned their stripes

Core real estate may have earned the right to be included in institutional investment portfolios in the past decade, but the same cannot be said of value-add and opportunistic vehicles, according to Jeff Jacobson, CEO of LaSalle Investment Management. ‘Value-add and opportunistic have not earned their stripes in real estate portfolios,’ he said during a presentation at the annual Inrev conference in Vienna last week.

Jacobson, who is now based in Chicago after a stint in Hong Kong, said that ‘style drift’ between real estate categories was largely to blame for much of the dissatisfaction among investors, and that the industry needed to improve governance and reporting structures.

Opportunistic funds had not returned significantly higher returns to compensate for greater risks and value-add vehicles should be focussed on doing things to assets, not leverage or development, he added. ‘Fund managers should be more explicit and explain why they execute strategies along these lines.’

An ad-hoc poll held during his presentation revealed that more than half of the delegates were dissatisfied with non-listed vehicles due to strategic and governance shortfalls. Almost 80% said industry changes in the wake of the financial crisis would not lead to better outcomes for value-add and opportunistic vehicles.

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