WINNER

“Impressive focus on Baltic capital real estate core and core+ segments with commendable returns,” judge’s comment

Country

Latvia

Overall AUM

€174,30m

Annual performance

3.90%

With an allocation limit of 15% in real estate and private equity, Swedbank Pension Plan Dinamika+60 (Dinamika+60) actively invests in indirect core and core+ real estate funds, focusing only on the Baltic capitals, where yields are currently more attractive than in Europe as a whole. Within the past year there has been slight capital appreciation, even with elevated interest rates, and no exits. Furthermore, the real estate funds have managed to transfer most of the inflation to tenants.

The funds invest only in properties located in Class A locations in Baltic capitals, with high quality tenants and transparent, long-term leases. Current yields in core and core+ real estate are estimated to be between 6% and 9%, excluding capital gains, while the average term of funds in the portfolio is seven to 10 years.

Dinamika+60 utilises a detailed process to select its real estate fund managers, evaluating core team competencies, prior experience, investment strategy and governance. Some of these initiatives are more common in private equity investing but are considered appropriate given the illiquid nature of real estate. Contract terms include incorporation of a European carry waterfall, overall fee alignments, keyman terms, and cause and no-cause termination clauses.

Dinamika+60 plans to require future real estate fund investments to be certified by BREEAM, showing they comply with certain environmental standards. Occupiers in the Baltics favour sustainable, certified properties and are willing to pay premiums of up to 10% of rent. The gap between rent levels for sustainable and non-sustainable buildings is also expected to widen during 2024.

STRATEGIC TAKEAWAYS

➤ Focus on prime Baltic capital real estate with quality tenants, giving attractive yields

➤ Rigorous evaluation of fund managers covering experience, competence and governance

➤ Focus on sustainability via BREEAM certification of properties, potentially giving rent uplift

HIGHLY COMMENDED

Country

Spain

Overall AUM

€4.38m

Annual performance

12.87%

CI Skyline invests in real estate mainly through REITs, infrastructure companies, and companies linked to the sector such as manufacturers of construction products or home appliances. Applying responsible investment criteria, it focuses exclusively on companies which are aware of their environmental impact, leaders in climate change and committed to new practices to reduce energy consumption. The fund’s greenhouse gas (GHG) emissions are 46% lower than those of the global MSCI World Index, in tons of GHG per million US dollars of sales.

Country

Italy

Overall AUM

€55,700m

Annual performance

3.9%

Direct investments account for the vast bulk of UnipolSai Assicurazioni’s real estate holdings, supplemented by joint ventures and mutual investment funds. In 2022, the renovation and development of real estate assets involved over 120 properties, including office buildings in Milan and Turin. A notable project is Urban Up, launched in Milan with the renovation of some of its most iconic buildings that has now been extended to other Italian cities, both to promote their trophy assets and regenerate suburban areas in a sustainable way. 

The Church Commissioners For England is one of the largest real estate investors in the UK, and as a faith-based charity funding pensions for retired clergy and wider Church activities, it sees investment in tangible assets as central to promoting its stewardship mission. Social responsibility lies at the heart of its investment decisions, and sustainability is a key component of its assets, whether timberland, affordable housing or other community infrastructure. The real assets portfolio returned 9.5% during 2022, with infrastructure funds and forestry delivering 41% and 11.9% respectively.

Judged by

David Hunt
Melville Rodrigues
Tajana Štriga
Christian Winder

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