Real estate, alternative real assets and other diversions

Consilia Capital Real Estate Funds Monitor Period end – October 2018

The Economist

1) A summary of October performance
As can be seen from the table below, (which is ranked by average October 2018 returns for each main mandate) the last month again proved a difficult one, with average YTD returns now all negative.

2) Fund Flows
Key features of fund flows for October were inflows for Global Passive Funds and outflows for Global Active Funds. In terms of other main mandates in our sample, Income funds saw outflows and infrastructure funds inflows (for the first month this year).

3) Focus: Alternative Strategies
This month we take a look at the Alternative Strategies (as distinct from traditional long only regional mandates). We look at the divergence of risk and return performance available in absolute terms, and relative to traditional mandates. The question we are seeking answer is whether the different strategies have produced materially different risk and return profiles to a standard mandate. Our findings are as follows:

  • The returns for standard mandate real estate funds over the 3 year period are 6% to 15% and the maximum drawdown % ranges from -14% to -17%. For Alternative strategies (excluding Inverse and Leverage Funds) the 3 year returns are -3% to 18% and the maximum drawdowns are -10% to -31%.
  • Over the 5 year period returns for standard real estate funds are 13% to 27% and the maximum drawdown -17% to -23%. For Alternative Strategies returns are 11% to 53% and the maximum drawdown -15% to -31%.
  • This excludes Leveraged and Inverse strategies which extend the dispersion even further. We therefore conclude that these alternative strategies are indeed producing differentiated risk and return profiles and could usefully complement a core global real estate securities exposure. We are currently undertaking some research in timing strategies for blending these Core and Alternative strategies.

4) Detailed performance statistics by mandate for Q3 2018
This month we look at the data for October 2018. For each mandate we show: the dispersion of returns by Fund AUM, aggregate performance by size, active vs passive performance, Benchmark Index returns, and the best performing active funds above an AuM threshold for each mandate. For consistency, all returns are rebased in US$.

The Economist

About Alex Moss

Alex Moss

Alex is responsible for developing the newly created Centre for Real Estate Research at Cass Business School. He also runs Consilia Capital, a research and advisory firm, which specialises in the performance and strategies of real estate, infrastructure and real asset funds, work that combines academic research with practical applications. He has been involved in research and transactions in the global real estate sector for over 30 years. His career has encompassed sell side research (BZW, Macquarie), investment banking (CSFB), private equity (Apax Partners Capital), and fund management (M&G and Investec). He is Chairman of the EPRA Research Committee, a member of the EPRA Advisory Board, and Chairman of the Investment Committee for the Investec Global Real Estate Securities Fund, where he acts as a consultant. Alex is best known for his academic and commercial work in the area of Global REITs, and their use in investment strategies. In 2013, with Professor Andrew Baum they produced two innovative papers for EPRA which received wide acclaim, looking at whether listed real estate was managed as part of the real estate allocation, and the wider use and applications of listed real estate securities in asset management. His work with Kieran Farrelly on combining direct and listed property for Defined Contribution Pension schemes won a Best Paper award at the 2014 ERES conference. A particular area of interest is the use of Smart Beta and automated trading strategies, most notably Trend Following and Momentum, and his work in this area with Professor Andrew Clare and Professor Steve Thomas has been widely cited. In 2017, with Reitsmarket he produced two multifactor Global REIT Smart Beta indices, which are listed on Euronext, and marketed by Goldman Sachs. Most recently he has been concentrating on the use of listed real estate within real asset strategies.

Articles by Alex Moss

Our Partners