The collapse of Lehmans and the onset of the global financial crisis may be disappearing in the rear view mirror as signs of economic recovery become more apparent. But for real estate investment managers the next few years are likely to be marked by further turbulence as repercussions of the GFC continue to play out in the industry. The impact of the GFC on the unlisted real estate fund industry has first to be considered in the context of other asset classes. One of its primary impacts was that it prompted investors to completely rethink their whole approach to investing and question everything from portfolio construction to the fees they paid.

Heightened risk aversion fuelled a flight to quality while investors’ belief in the traditional portfolio theory that purported diversification among the mainstream asset classes to be a means of reducing risk exposure was shaken as equities, bonds and even cash funds fell during the GFC. As fear became the dominant emotion controlling financial markets, investors turned to those assets that looked best placed to weather the storm. Capital growth became less of an aspiration and instead, investors looked for quality assets providing steady income to generate returns.

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Authored by Justin O’Connor, CEO, Cordea Savills