Low leverage-low volatility approach beginning to pay off

Low or no leverage has been criticised as an approach to real estate investment, given the era of ultra-low interest rates. But now interest rates seem to be on an upward trajectory, such investors are in a position of strength.

“For the last five or six years I used to hear: ‘why don’t you leverage, it’s almost stupid not to leverage with interest rates so low?’,” Lisbon-based Square Asset Management’s chairman Pedro Coelho explained.

“We have retail clients with small savings and what they do not want is uncertainty and volatility, so we try to offer that,” he said.

Returns may be lower but this approach also implies very low volatility.

“Because of that, we are always receiving new money and we are going to probably a have a record year in terms of income flows,” Coelho added.

Square AM consequently has a lot of cash to invest and is always now looking for new opportunities.

“Probably now is the time when we can be more competitive in sectors that previously, due to high leverage, we were not competitive at all.”

Iberia has not been untouched by global economic trends and the war in Ukraine. Increases in inflation and interest rates mean there will be some more difficult times ahead. But Coelho said Iberia is much better positioned than it was during the global financial crisis. He added that the most important thing is to see both individuals and companies wanting to move to Iberia because investment flows after them.

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