‘Find safety in alternatives’

Alternative property assets offer safety in times of GDP falls and volatility, a panel heard today at the MSCI/IPF Property Conference. Hideki Kurata, head of alternatives and special situations at AXA IM Real Assets, said that because alternatives are “de-correlated” from GDP, they are more defensive when other sectors are under stress. AXA’s €2.3bn (£1.9bn) hotels portfolio grew because the number of international travellers grew during the financial crisis despite economic volatility. Kurata said: “The UK has been a strong focus because of its underlying strong GDP growth and some of its cities, especially London, are the priority destinations for Middle Eastern tourism. “We said, ‘Instead of being exposed to GDP variation, let’s be exposed to the underlying stability of the increase of travellers.’” Healthcare REIT returns did not dip as much as REITs focused on other sectors during the financial crisis in the US. Healthcare growth in the US, with its aging population, was not linked to GDP and outperformed other sectors following the financial crisis, he said. However, Kurata added that those assets should not be blindly invested because needs varied from place to place. In the UK and France AXA has almost no healthcare assets because it thought the risk was too high. Kurata said: “You cannot invest blindly in healthcare. You need to understand each of the countries, or regions, as to what are the risks you’re taking on in your portfolio.” Paul Richards, head of European real estate at Mercer, added that many investors – who might not understand real estate as an asset class – are now focusing on real estate not because of the asset class but because of its returns. He said: “It’s all about the liquidity premium at the moment.” Growth, he added, was not going to come from traditional real estate, which rises with GDP, but from alternatives. • To send feedback, e-mail karl.tomusk@estatesgazette.com or tweet @ktomusk or @estatesgazette