Real Estate investing was also part of the strategies reviewed and more specifically commercial real Estate.

Speakers reached a consensus that most of the capital gain potential are already in the prices. So commercial real estate investing is now mainly about income and yield generation.

This implies heavy involvement in developing/managing/maintaining the assets in order to maintain their marketability. It also makes investors more vulnerable to the economic cycles. This is not yet fully the case in the UK as the legal system is very much in favour of the landlord versus tenants. Speakers mentioned this trend is irreversibly reversing, as demonstrated for example by the shortening of leases. It is likely that the UK market reverts to what is now the norm in continental Europe as well as in the US, which will weaken landlords ‘positions. However, commercial real estate remains historically a safe way to ride cycles over the long term. How that is compatible with mark to market and liquidity ratio constraints remains to be looked into…

Participants were also keen to point out that there was limited interest in trying to bypass the inherent lack of liquidity of that market.

All structure and products linked to real estate, including REITS have demonstrated during the past crisis that a product cannot be more liquid that its underlying market, especially in times of crisis. Some would argue that this is precisely when one really needs it…

Private real estate was briefly touched upon. Consensus was that the only consideration currently holding back pension funds to massively re-enter that market is the potential reputational risk linked to exercising their guarantees in case of default. The unbalance of supply and demand and the current yields create a compelling investment case. Watch that space!