Aberdeen Standard Investments' view is that real estate markets are not necessarily efficient. There is potentially considerable variation between buildings and the markets that they are located in; identifying mispricing and the imbalances of demand and supply is fundamental to generating sustainable income streams and long term growth.
The key is knowledge
We aim to achieve superior investment performance through applying strong local insight using our own locally based resources. Our locally based teams, doing their own research, are an imperative to understanding local market dynamics and ultimately their observations enable us to be high conviction investors within a robust market selection framework.
Looking for quality and price
We estimate an assets value and worth using long term tools to assess value, growth and ultimately liquidity, to provide protection during market downturns. This value comprises of both “quality”, then “price”. We define quality with reference to:
- The location of the asset
- The physical quality of the building
- The contracted income from the tenant
- The durability of the income stream; ultimately do tenants want to occupy this real estate.
In our search for quality, we believe it is of vital importance to underwrite an asset’s prospects through thorough team-based research using a wide pool of specialist in-house resources (portfolio managers, transaction specialists, local research analysts); the team culture is of particular relevance in this regard. Ultimately fund managers are required to make decisions and before an asset transaction proceeds they will present to a broadly represented Investment Committee to seek its review and support.
A little of what we don’t do
There are plenty of things that other fund managers do that we don’t. Unlike many of our peers, our actively managed portfolios aren’t limited by market weightings. We don’t let market indices dictate how much should be held in a particular market or sector. That means we won’t hold an asset just because it’s in one of the largest or best performing markets, instead, we give our fund managers the simple freedom to focus on the assets they really like and disregard the ones they don’t – while always keeping within the risk guidelines detailed below.
A little of what we do
Funds of course have to be lead, but they are managed on a team basis with no 'star' fund managers and rigorous risk review mechanisms consistent over all real estate funds. Therefore, a continuous watch is kept over critical factors that influence investment decisions, so that when views change, action is taken swiftly and decisively to reposition portfolios.
Managing risk is key to our process. We apply a risk-based approach across all real estate market strategies capturing long, medium and short term asset level risk in our underwriting. An independent Performance & Risk team monitors how our portfolios behave and check that our risk guidelines are appropriate, for example in terms of formal limits on the extent of an individual holding or exposure to certain countries or tenants’ business sectors. However, we recognise that risk is controlled most effectively by having a thorough knowledge of every asset we invest in – and ensuring that each portfolio is properly diversified at all times.