The crisis has made most investors re-assess their allocations this year. Logistics has been the clear winner, but some have made more surprising choices, delegates heard at Real Asset Media’s How Much of What and Where? Asset Allocation in the Investment Market briefing, which was held online last week.
“The pandemic has changed things and our pie chart looks different now,” said James Farmer, director acquisitions, Europa Capital. “We’re usually big investors in offices, around 35-50%, but we’re likely to invest less in future. Retail is off the menu completely, but we will invest more in resi and logistics.”
Risk diversification is the priority for many, for others it is making contrarian choices with an eye to medium to long-term developments.
“We haven’t changed our allocation because of the crisis, we like the same things and are wary of the same things as before,” said Doris Pittlinger, managing director, fund management Europe, Invesco Real Estate. “Logistics is in such demand that it’s difficult to make money out of it, but we will increase our allocation to residential, we call creative living, anything with a bed in it.”
There are opportunities in sectors that many stay well clear of, she said.
“This year we’ve invested a lot in Paris high street retail, because it’s resilient and it will come back,” Pittlinger said. “We believe in the future of travel and the joy of shopping in Europe’s capital cities, but we stay away from shopping centres, because they need a lot of investment that eats away at your returns.”
Leisure and hospitality is another sector that has been battered by the crisis but is now seeing some activity.
“Capital is being raised in the market for leisure & hospitality opportunities that will come up in 2021, because people can see the recovery coming’,” said Pittlinger. “As owners and landlords we need to come to the table, we can’t just watch people become insolvent.”
There is likely to be a survival of the fittest, as only the best hotel operators will weather the storm.
“Travel is a megatrend that will thrive again once the current difficulties have been overcome,” said Claus Thomas, CEO, BNP Paribas Real Estate Investment Management. “We recently bought a hotel in Munich and we’re convinced we will not lose money on it. We see it as a good long-term investment.”
Europa Capital exited its last hotel position in December, said Farmer: “It was well-timed. But I agree that the medium to long term fundamentals of the sector are strong.”