When investing in foreign real estate, multi-manager solutions have the advantage of broad diversification across several dimensions, including managers, funds, joint ventures, regions, and types of use. This reduces portfolio risk without sacrificing any return.
Success depends on strong regional and sector expertise and a good network of partners. It is especially important to gain a deep understanding of the long-term value drivers in the markets and sectors before investing. A top-down view on GDP growth, interest rates, inflation, and real estate macro factors, such as rental growth and supply/demand in the different regions, needs to be taken into consideration along with megatrends like urbanization, technology, demographic change, and the way they affect markets and sectors.
A key factor in success is the selection of partners
There are well over 1,000 unlisted real estate funds, and the number is rising constantly. These private equity real estate funds, as they are known, provide very transparent reporting to existing and potential investors. Unlike with traditional investments, however, there are no public databases that provide an overview of the investment universe or the key data for individual funds. In addition to funds, multi-manager products can also invest in customized joint ventures or set them up with suitable local partners.
A key factor in success is selecting the right partners and funds. For this, both quantifiable variables, like valuation parameters and fund conditions, as well as qualitative factors, such as strategy and team, are taken into account. Such an approach requires an investment process that is both balanced and rigorous. The relevant actors need access to reliable, up-to-date information, and should then decide whether or not to invest on the basis of a dispassionate review.