European Investors, Inc.
European Investors, Inc. (EII)
REFIRE knows only too well that it has never been easy to get German investors to allocate part or any of their resources into stock market-listed property shares. This we suppose is partly due to the per- ceived risk factor, and undoubtedly also partly due to the successful lobbying and marketing in the past by the ever-present open-ended funds, who smoothed out undesirable volatility to deliver a steady, stable return with little apparent risk.
Until, of course, the open-ended fund model was discredited with the freez- ing and subsequent liquidation of many former household fund names, while nu- merous investors were left nursing hefty losses when the funds had to take size- able valuation write-downs on their as- sets. However, the attraction of liquidity has again drawn investor attention to the merits of property shares as an alterna- tive to direct investment, while mirroring the returns on real bricks-and-mortar as- sets over the longer term with the added attraction of risk diversification.
The long-established, New York-based investment boutique European Investors Inc (EII), which focuses on managing investments in real estate securities portfolios, has launched its first sustainable real estate fund, initially targeted at German investors.
The EII Global Sustainable Property Fund is a German domiciled mutual fund set up to specifically invest globally in REITS and other publicly-traded property companies meeting a range of environmental and social sustainability criteria. It says its focus will be on equities of companies worldwide involved in owning, managing, developing and financing commercial and residential properties that are meeting acceptable sustainability criteria. The Fund itself will be managed by EII investment people based in EII ‘s offices in New York, Singapore, Munich and Amsterdam.
REFIRE spoke this week to top management at EII to learn more about the fund. According to Christian Lange, the German-born co-founder and president of EII, “Sustainable Investment is one of the key themes for the twenty-first century. Companies that can combine economic, environmental and social objectives not only minimize their risks, but may also enjoy significant competitive advantages. Investors need to be able to rely on high-quality research and specialized real estate securities portfolio management skills and we are excited to deliver these necessary components through our relationship with Oekom.”
The Munich-based Oekom Research AG is an independent sustainable research and rating agency, whose identification of qualifiying companies will help steer the fund managers to the companies in which the fund will invest. The agency partners with institutional investors and fund managers to filter issuers of equities and bonds, in this case from a universe of about 150 companies in liquid markets around the world that would meet the EII criteria.
Lange also said that his company had done extensive back-testing over a ten-year period, and were thus able to demonstrate conclusively that investment in the shares of companies who had the highest sustainability ratings had considerably outperformed the average returns of the FTSE/NAREIT/EPRA constituents.
Marco Braun from EII’s Munich office said the initial targeted geographic allocation would be about 39% North America, 20% Europe, and 35% Asia – but would in any event differ from the FTSE/NAREIT/EPRA weightings to take account of different degrees of market experience with Oekom-style ratings.
The Fund was launched at the end of 2012 as a German-domiciled UCITS funds and launched with an institutional share class with annual dividend distribution. Warburg Invest KAG are handling the investment with State Street Bank in Frankfurt as the custodian bank. Minimum investment is €1m.
EII manages more than $11bn of assets worldwide, of which $10bn are invested in real estate securities. The company initially focused on investing in the US on behalf of European investors but has since expanded its remit to include institutionals, family offices and ultra high net worth private individuals from all around the world.