Fund managers both praise and bite the hand that feeds


Real Estate Capital gets fund managers’ frank, off-the-record views of the consultants they rely on

Real Estate Capital spoke to fund managers – all very well-known in the industry, from big houses to boutiques, balanced core funds to opportunistic ones – about their views on consultants.

None were prepared go on the record, because consultants “are the hands that feed us,” as one major fund manager explained.

However, this is what they had to say…


“They are very powerful gatekeepers. You can’t live with them and you can’t live without them. There have been times when I felt they haven’t understood the story or they haven’t been able to put in the time, or they’ve been fixated on CBRE and LaSalle and the other big names.

“But equally, once you do get traction with the consultants, it’s a very efficient way of winning new business. You can build a relationship with four or five individuals and know that you’ve got a damn good chance of being included in their thinking if they were to go out with a new appointment.

“Dozens of pension funds might be potentially investing and it would be difficult, if not impossible, to build a relationship with them all in the hope that at some point they might be interested in a product you have.

“They very formally reassess our capabilities and track record once a year and, to varying degrees, give us feedback on the results – in one case very specific detail. So we know full well whether our service is rated a buy, hold or avoid/sell.

March 2013, page 15, face 2“Consultants have done more good than harm in terms of raising the game and making the industry more respectable in the eyes of pension funds. I would give them a seven or eight out of 10”

“From their clients’ view, it provides some comfort to trustees that they are acting in a prudent, responsible way. The pension fund sees a rating agency sort of approach, that someone is thinking about these matters, they have experience and are on the fund’s side by monitoring the manager.

“A positive side is that consultants have got some managers to think beyond: ‘I’m a property person, I know this high street, I know M&S want to go into this unit’, and to think a bit more about the contribution real estate is making as an investment in their portfolio. Consultants have caused a few managers to sharpen their act up, particularly in areas like corporate governance.”

“I think they have done more good than harm in terms of raising the game and making the industry more respectable in the eyes of the pension funds. I would give them a seven or eight out of 10.”


“Consultants are incredibly shortsighted and do not do a great job of serving their clients. Historically their understanding has been pretty basic so – and this may be the right thing to do – they default to the bigger, sleepier managers with reasonably pedestrian track records.

“It’s changing a little bit because there are new guys coming in who are definitely better and get it a bit more. ““However, there is an obsessive concern in the UK about deviating in any meaning-ful way from relative performance. The actuaries call the shots – and everybody is afraid of their actuaries. They don’t understand the portfolio theory approach to property as an asset class.

“It’s a fear of alpha. They try to place their allocation based on their actuarial objectives in the most index-hugging way possible; it is better to be wrong with the crowd than right. “Once they’ve decided X% is going into real estate they fall into relative performance and then stop. Very little time is spent afterwards other than filling out forms. They don’t do an effective job of working along the risk spectrum.

“One frustration is that consultants can get fixated on one idea – like a dog with a bone. Now it’s liability driven investment. They will all pile into the handful of long lets out there and pay way more than they are worth.

“They are relatively under-resourced teams and, dare I say, not people who have necessarily done a lot in the investment world. They critique me or the property fund, grilling us about the platform or staff turnover, my experience and track record. Which is fine, but if you turned the spotlight back it wouldn’t be a pretty picture. “They have a huge amount of power without, superficially, a lot of responsibility. They ultimately say it’s the client’s decision, but clients are very unlikely to go against a consultant’s advice.”