By Marc Gilbard
The Mansion House Accord is right to recognise that UK institutions are broadly under-allocated domestically and also to alternative assets.
Moorfield Group has never experienced a strong appetite from UK institutions to invest in UK real estate through private closed-end funds. As such, we have not been dependent on UK institutional investors for capital and our original business plan in 1996 (reflecting this) was to be the UK private equity real estate partner to overseas investors wanting to invest in UK real estate but without the expertise to do so on their own.
However, we have recently broadened the outlook for our investor base to include the UK, and I am delighted to have welcomed two ‘blue-chip’ university college endowments into our latest diversified value-add fund. In future, we would certainly hope to have many more UK institutions invest into our funds, or through separate management agreements (SMAs), alongside us.
We believe it entirely appropriate that UK institutions should be both the investors and beneficiaries of successful real estate investment, development and asset management in the UK, either directly or through investment managers such as Moorfield.
Having been through a very tough period in the UK since Brexit in 2016, we expect UK real estate to be a net beneficiary of institutional geographic and asset class reallocations thanks to our favourable geopolitical positioning between the US, Europe and China, alongside the likely interest rate trajectory and rebased property values. The UK has repriced its real estate to a greater degree relative to many of its European peers like France and Germany, and so this is an appropriate time for UK institutions to increase their weighting in UK real estate.
There will always be voices that say UK pension funds could and should be doing more to invest locally to help advance the UK and its communities, and we can see this side of the argument, but equally they also all have a fiduciary duty to deliver the best risk-adjusted returns to their policy-holders. There is unlikely to be an immediate effect from the Accord, but more UK institutions allocating domestically will likely enhance the focus on the UK real estate market from multiple perspectives, thereby improving the asset class liquidity over the medium to long term and also generally improving the UK’s ‘real assets’ sector and the beneficial community impact.