MIPIM delegates remain quietly upbeat in highly variable climate

COMMENT

writes Alex Catalano

Alex Catalano, Consultant editor

If you didn’t go, you probably already know that you missed a bit of riviera sunshine, but also cold evenings, torrential downpours and even some snow. We’re talking about MIPIM, of course, and it was noticeably quieter this year, whatever the organisers say about the numbers holding up.

But the mood was more upbeat and deals were being done. Fund managers reported greater investor risk appetite and positive capital raising prospects – a few have already done it (see p3, news1, news2, news3). The view was that away from overpriced prime, property looks relatively cheap. There was talk of 2013 being a good entry point to real estate and lots of people intend to make investments.

The growing number of debt lenders were out in force and some newer entrants said it was their most productive visit ever. The additional finance available is driving some of the cautious optimism, especially as the extra liquidity already appears to be moving margins in borrowers’ favour (p2).

But it will take time to work into the market and few saw the speed of transactions picking up, especially as expansion is into more complicated or secondary assets. With occupational demand weak, performance prospects still vary considerably depending on asset type and location.

Pension fund gatekeepers must open up

This month’s special feature looks at the consultants who advise pension funds (pp12-14, 15, 16-17) – the bouncers at the pensions party, deciding which fund managers will be let in. And it’s a big party; UK defined benefits schemes alone hold £1trn of assets.

The UK’s big three consultants – Aon Hewitt, Mercer and Towers Watson – told us about their views on real estate, their strategies and how they select the fund managers they recommend to their clients.

It isn’t an easy job steering pension fund money, now that financial crises have led to greater market volatility, all-time low interest rates, disproved the idea that sovereign bonds are risk-free and increased regulation.

We also asked fund managers about their relationships with consultants. No-one, even those on the consultants’ VIP list of recommended providers, would talk openly for fear of alienating the bouncers.

But managers clearly felt there is a lack of communication and transparency from consultants – not necessarily between firms on the VIP list and gatekeepers, but with the whole investment industry. As one person said, their ‘process’ is really a black box.

Some criticisms may be the sour grapes of managers turned away from the party; perhaps they haven’t grasped the new dress code of liability-driven investment (pp10-11).

But their disquiet with consultants seems to have a real basis and it is a continuing problem. It could get worse as these firms move into ‘delegated consulting’, where they take the chief investment officer role for a pension fund. More transparency and dialogue would be much healthier.

 

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