Future-proofing ‘core’ is now the fund manager’s challenge

Until the pandemic shook up our lives and markets, “core” seemed to be a straightforward concept that implied strong covenants and long-term income streams.

Now we need to ask, and to understand in more detail, why an asset is capable of generating strong demand and whether it can do so beyond the current occupation according to Christina Ofschonka, managing director fund management, AEW.

Apart from the pre-existing trends that the pandemic has accelerated, the need to ensure that assets meet ESG requirements has added further complexity. “It’s a very dynamic context,” Ofschonka told Real Asset Insight’s Richard Betts. “Assets need to be, and need to stay, future proof. You need to be very active in order to successfully run a core strategy.”

“Ultimately it comes down to the ability of an asset to generate a long-term sustainable demand from occupiers which then translates into being future-proof,” Ofschonka added.

She said that in the long term, sectors that have historically been perceived as the most liquid or as safe havens will not continue to be defined that way by default. Although logistics and residential are likely to continue to become viewed as lower risk sectors, office and retail will find their equilibrium, albeit with higher yield expectations. But the shifts mean that new opportunities will emerge: “When others are doubtful, then undervalued assets can be found”.

Click on the video above to watch the full interview or listen to the podcast below.