Investors want funds that can protect capital, outperform benchmarks and offer diversification. Many are turning to real estate, but the options are wide ranging.
Pierre Servant (pictured), chief executive of Natixis Global Asset Management, said that commercial real estate was "not yet out of the woods" as it is directly linked to the growth of the economy. Stagnant growth means fewer companies look for new offices - and Servant believes this problem will not disappear overnight as the world is set for a global recession.
However, Antoine Flamarion, founder of French investment management company Tikehau Capital, is convinced an up-and-coming niche area of the commercial property sector will prove lucrative: green commercial real estate. Tikehau had underlined its focus on this area by taking on Arnaud de Pesquidoux in June, a French lawyer with real estate expertise.
FOCUS ON PARIS
According to Flamarion, the central Parisian residential property market has become too expensive and is stuffed with old, energy inefficient apartment blocks.
French newspaper Le Figaro recently reported the price of an apartment in Paris increased by 5% in the second quarter of 2011, totalling a 22.5% increase in just one year.
On average it says the price per sqm in the city is €8,150, although the Chambre de Notaires de Paris gives a more conservative estimate of €5,480 across the Île de France region. The most profitable buildings to invest in are office blocks on the outskirts of Paris, Flamarion says. He considered the green property investment route as "logical" due to the environmentally friendly sentiment currently in vogue in France.
Flamarion adds that the French are keener than ever to "save the planet", having suffered an environmental crisis of conscience after French oil company Total's oil spill in 1999. Tikehau has consequently launched its first real estate fund, Tikehau Green Real Estate, investing in sustainable commercial property with low energy consummation levels.
French company Bouygues (specialising in telecoms, construction, energy and real estate) is the fund's promoter and will provide 10% of the liquidity costs for new constructions. Flamarion is expecting the fund to yield 12-15% per year.
It has been structured as an Organisme de Placement Collectif Immobilier, a French private property investment vehicle similar to the Luxembourg Sicav.
Its main restriction is that 60% to 90% of the fund's assets can be invested in real estate, but a minimum of 10% and maximum of 30% must be allocated to a different asset class.
Another structure investors could consider is the real estate fund of funds. In April, UFG REM, part of the UFG-LFP Group, set up a European fund of funds comprised of office and retail real estate assets in Northern Europe - in particular the UK, Scandinavia, Germany and the Netherlands.
This diverse range of funds have one common denominator: concentrating on northern European property markets.
According to a report issued by Savills, the global real estate provider, the UK, Germany, France, Sweden and the Netherlands have been overall the most active investment markets in the first half of 2011, accounting for more than 80% of the total real estate transaction volume across its surveyed markets.
This is no doubt a reflection of southern Europe's financial predicament and a trend that will last as long as the threat of recession hovers over the eurozone.