Being a generous sort of guy, a couple of weeks ago I kindly volunteered Ian Whittock, our CIO, to take part in an expert panel discussion at an event, held last night, organised by that august institution, Chicago Booth (the second oldest business school in the world with previous students including no less than 7 Nobel Laureates).
The other three panellists were all Chicago Booth alumni and comprised Keith Breslauer, head of Patron Capital, Stephen Barter, Chair of Real Estate Advisory at KPMG and Van Stults, Founding Partner and Managing Director of Orion Capital – Ian was indeed in rarefied company!
However, for those of you that know Ian, you will not be surprised to hear that he brought his usual thoughtful and strategic approach to the debate, demonstrating yet again both his passion for investment performance and why he adds so much to both the KFIM business and, more importantly, delivering performance to our client portfolios.
Anyway, rather than spend any more time extolling the virtues of Mr Whittock, here are a few of my take outs from the evening:
• Key messages to the politicians in the lead up to the UK election:
o Depoliticise the planning process (which I translated as “have a bit of backbone, decisions such as the third runway are far more important than your own political self-interest).
o Accelerate the release of public sector land for residential development.
o Create a firm strategy for high density planning in London.
o Provide certainty over taxes (and based on this morning’s headlines, the Conservatives must have been listening!).
• Low inflation and low bond yields suggests that we all need to get used to lower future returns.
• We are seeing a tidal wave of liquidity across the world. What are the implications of this? One of the panellists suggested that we might need to be wary of medium to long term behaviour of the new investors which, at the current time, remain uncertain.
• Too many people are now placing pricing ahead of real estate fundamentals; a view that we at KFIM definitely agree with!
• Europe: Spain remains attractive due to the recovery, Germany is stable but unexciting (that came from the Orion and Patron panellists albeit, as a core investor, these are the exact attributes that make this market attractive to KFIM), Dublin is too small (another view that we would not agree with) whilst Northern Italy (manufacturing and exporting) may well surprise on the upside.
• Globally: from an opportunistic standpoint, the best source of capital is likely to be the States and Korea (the latter surprising me slightly).
• Residential: lack of institutional ownership in the UK is stymying supply within the market.
• London: comprises two different types of investors, the sophisticated institution running spread sheets, data analysis etc., and the investor that just wants to buy what he/she likes in what they consider to be a stable, transparent market; these two investors have very different drivers of pricing but, where they are in competition, there is only one winner! This two tier market is unlikely to go away anytime soon!
All in all, an interesting evening with some excellent albeit at times quite different insights from the panellists; perhaps demonstrating the difference between the core / core plus investor (KFIM) and those that are perhaps higher up the risk scale.
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Knight Frank Investment Management LLP (KFIM) is a limited liability partnership registered in England with registered number OC311715. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. Knight Frank Investment Management LLP is authorised and regulated by the Financial Conduct Authority. No part of this publication may be reproduced in any form without the written permission of KFIM. Data has been compiled from sources believed to be reliable however its accuracy and completeness is not guaranteed.