At Deutsche Asset Management (formerly DWS), we consider the next six to 12 months as a period in which select core real estate investments may present attractive opportunities, while recognising that the recovery remains uneven and market conditions remain uncertain. This article explains the basis for that view and describes how we construct portfolios that seek attractive long-term risk-adjusted returns.

When Rudyard Kipling wrote his now globally recognised poem, “If” 1895, the qualities he conveyed were humanistic. He challenged us to develop certain core behaviours - specifically self-belief and resilience.

But he also encouraged us to throw a blanket of humility over all those things; imploring us to listen, to learn and to always look for the counterpoint.

For Deutsche Asset Management, investing in an impertect, inefficient market such as real estate, has many parallels, especially in a rapidly changing built environment. Self-belief in investment ideas can help identify themes with the potential to support relative performance. In our experience, core mandates are generally better positioned when they maintain an intensive focus on risk management, invest thematically and selectively pursue early-mover opportunities, and remain sufficiently nimble to respond to changing market conditions*.

But as well as having a high degree of conviction in the themes we identify, we also believe that resilience and humility are at least as important, if not even more so. These two qualities lean more into the concept of effective risk management than return generation per se, and there is an easy read across to Kipling’s qualities:

i. Resilience - building a portfolio intended to support long-term returns across a range of market conditions;

il. Humility - being open-minded, progressive and listening to others to help inform, develop and learn.

Resilience (and our approach to Core investing)

At its heart, core real estate investing is about seeking income-producing assets. After all, it is income that has accounted for 70% of total returns over the long-term (Source: CBRE). But if we delve a little deeper into what income means, and what sort of risks can be accessed through an income lens, we can gain some useful insights.

Read the full ‘Thought Leadership’ article at the link below