Article
Investing indirectly in foreign real estate through funds or multi-manager products has many advantages. Investment solutions based on net asset value (NAV) in particular show moderate volatility and a low correlation with direct real estate investments and traditional investments.
April 21, 2022
Foreign real estate investments through multi-manager solutions offer the advantage of broad diversification across various dimensions, including managers, funds, joint ventures, regions, and usage categories. This reduces portfolio risk – with no negative impact on yields.
Success is based on a high level of regional competency and sector expertise, as well as a good partner network. Before investing, it is especially important to gain a thorough understanding of the long-term value drivers in each market and sector. In addition to the top-down view of GDP growth, interest rates, inflation, and macro factors in real estate (such as rental growth and supply/demand in each region), investors should also consider major overall trends, such as urbanization, technology, and demographic change as well as their effects on markets and sectors.
There are well over 1,000 non-listed real estate funds, and that number is continuously growing. For current or potential investors, these private equity real estate funds provide a good deal of transparency. But in contrast to traditional investments, there are no public databases that allow for an overarching view of the investment universe or the key performance indicators of individual funds. In addition to funds, multi-manager products can also invest in customized joint ventures or establish joint ventures with appropriate local partners.
The selection of partners and funds is a key success factor, and the Multi-Manager Real Estate team at Credit Suisse Asset Management scrutinizes the fund management company, as well as the fund and its existing real estate portfolios. Both quantifiable variables, such as valuation parameters and fund conditions, as well as qualitative factors, such as strategy and team, are taken into consideration. Information gathered from an extensive due-diligence process is submitted to the Multi-Manager Real Estate investment committee, which then decides whether or not to approve the investment based on an objective review.
The portfolio management of CSA 2 Multi-Manager Real Estate Global benefits from its international presence as well as a high and, in some cases, exclusive deal flow when selecting partners and funds. This allows minimally marketed funds to be regularly assessed. The Multi-Manager Real Estate team routinely pursues fund formation strategies with sectors such as last-mile logistics, which have few eligible investment funds but exhibit high potential.
This strategy involves establishing a new fund with a suitable partner with a local presence, sector expertise, and a strong track record. This has the advantage of not only gaining access to the desired sector in a particular market but often also leads to a faster capital call. In addition, very beneficial conditions for fund formations can be negotiated for multi-manager products.
Furthermore, the Multi-Manager Real Estate team is also frequently offered secondary-market transactions for review. These are attractive because the capital can be immediately invested or fund units can be acquired at a price below the NAV.
Overall, foreign real estate funds offer a high diversification potential and attractive yield opportunities. The Multi-Manager Real Estate team is a proven partner with access to an extensive global network and a focused expertise, allowing them to identify and take advantage of opportunities as they arise.
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