M&G Investments is an innovative active asset manager investing €317bn across fixed income, equity, real estate and multi-asset strategies across the UK, Europe and Asia. M&G Real Estate is a real estate investment solutions provider managing assets across all major and alternative sectors. We manage $41.7bn of assets, making us one of the top 30 property fund managers globally (according to PFR/IREI 2020 rankings). We employ over 300 people spread across 12 offices globally.
Through our range of pooled funds, segregated mandates, investment partnerships and joint ventures, investors have unrivalled access to compelling investment solutions in global real estate and real estate finance. We offer senior and mezzanine debt across the UK and continental Europe, either on a standalone or combined basis, making us one of the few asset managers to offer a directly originated, ‘one-stop’ solution for borrowers.
We help investors achieve better outcomes by accessing superior investment opportunities and actively managing every building to unlock value and deliver strong risk-adjusted returns. Through our activities, we can also make a positive impact on society. To this end, our responsible property investment team plays a fundamental role in ensuring we use our resources to enrich the lives of people and communities by creating world-class places to live, work and play. In 2020, we achieved ‘Green Star’ status for 10 funds in the Global Real Estate Sustainability Benchmark survey. We are committed to achieving net carbon zero across all our real estate assets by 2050.
Strategic corporate development
Our real estate strategy over the near term is aligned to our overall corporate strategy which is to provide active high-value investment solutions to our clients, in more markets and through a wider range of structures. Key pillars in the growth strategy:
- Customers: building our business around them and using our experience and insights to meet their needs;
- Distribution: expanding the range of propositions and the channels through which we deliver them;
- Investments: producing good outcomes for customers through our expertise and innovation;
- Merger and transformation: creating a simple, digitally enabled business with lower costs focused on customers.
M&G Real Estate is well-positioned for growth, being one of the most international of UK-based real estate investment managers. We seek to grow our assets under management in a profitable and sustainable manner by offering a focused range of globally scalable funds and strategies to meet the investment requirements of our clients and attract new sources of institutional capital to the business. We will shortly be launching a European Living fund and a Shared Ownership fund to provide investors with more options in the alternative space with a low correlation to both commercial real estate and other asset classes.
INDUSTRIAL: The logistics sector has shown resilience through the pandemic, backed by the mass adoption of e-commerce as well as strategies employed by businesses to enhance operational resilience such as the shift from ‘Just-In- Time’ to ‘Just-In-Case’ inventory. These trends are expected to remain in place even after the pandemic, which should bode well for the logistics sector over the longer term. As such, developed APAC markets with a relatively large domestic population and low availability of prime modern logistics assets are expected to see sustained outperformance, at least over the medium term. This includes markets such as Tokyo, Osaka, Sydney, Melbourne and Seoul, where market fundamentals remain favourable and vacancy rates continue to tighten.Thats aid, active development activity poses downside risk to rental growth. Hence, location, size and asset quality will continue to be key considerations; high quality assets with close proximity to key transport hubs, ports and consumers that can accommodate physical automation equipment are likely to command higher rents and prices.
OFFICE: With the resumption of economic activity, the developed APAC office sector is expected to make a cyclical recovery over the medium term. The introduction of hybrid working could, however, potentially dampen the extent of recovery in demand. While the region is expected to see increased levels of telecommuting, offices remain an integral platform for employees to collaborate, exchange knowledge and develop trust. Furthermore, within Asia, compact residential spaces coupled with a higher emphasis on face to face meeting make working from home less ideal. Hence, prime office assets with strong ESG credentials situated in core locations are expected to outperform secondary grade assets which are more susceptible to obsolescence risk. Innovation-centric office submarkets where vacancies are low and new supply is limited, such as Seoul’s GBD and Singapore CBD, are expected to see sustained rental growth over the medium term.
RESIDENTIAL: The defensive and non-cyclical nature of Japan’s multifamily sector has once again been observed through the pandemic when occupancy rates remained high. Meanwhile, the preference for inner-city living in Japan should remain undeterred given how white-collared job opportunities will likely remain centred in cities; inner-city locations are thus highly attractive to Millennials and Generation-Z occupiers. Meanwhile, across developed APAC markets, rising residential prices continue to make home ownership for the younger generation increasingly difficult. Markets with a deep pool of renters, including Australia, Seoul and Hong Kong, may be possible targets for the nascent multifamily asset class. Australia’s built to rent sector, in particularly, is well-positioned to mature over the medium to long term given newly introduced government policies, rising investor interest and favourable fundamentals.
RETAIL: With accelerating vaccination rates and the rising possibility of the resumption in leisure travel, a cyclical recovery of the retail sector can be expected over the medium term. High-street retail, in particular, is expected to see rents stabilise before rising upon the return of overseas travellers. That said, the potential delay in tourism recovery and elevated vacancy rates in select submarkets may weigh on rental growth prospects. Meanwhile, prime suburban shopping centres in dense neighbourhoods that have remained resilient throughout the pandemic are expected to remain relevant despite rising adoption of e-commerce penetration due to the higher levels of F&B and services offered (eg, enrichment centres, medical etc). In addition, these prime shopping malls serve as a community hub for the local catchment to gather and socialise. With low incoming completion of retail malls, prime suburban retail in mature precincts, across Singapore, Australia and Hong Kong, appear more attractive and could experience modest rental growth over the long term.
Investment principles & strategy
Our investment philosophy and approach is built around the needs of long- term, income focused capital and is shaped by decades of experience managing the assets of insurance companies and pension funds which make up 89% of our AUM. Investment decisions are informed by proprietary forecasts and market insight from an experienced global research team.
We believe that:
- Income is the primary driver of long-term returns. We target and proactively manage assets which can generate sustainable, growing income streams.
- A balanced portfolio diversified by geography and asset type enhances risk adjusted returns over the long term.
- Real estate markets are inefficient. Using proprietary research and financial models we identify and exploit mispricing at asset class, real estate sector and individual asset levels.
We aim to provide commercial real estate mortgages to borrowers secured against a range of different investments, including income producing, transi- tional and development assets.
Moreover, we are strongly focused on self-originating debt that allows us to achieve attractive risk-adjusted through:
- Origination – direct origination of loans to maximise negotiating power .
- One-stop-shop – reduce execution risk. Provide senior and junior debt in a single whole loan solution.
- Hold-to-maturity – a buy-and-hold investor.
- Funding large transactions – average ticket of £100m+.