When it embarked on its real estate strategy in 2013, multi-employer fund APK recognised that a direct approach was not viable, given its resource constraints and the need to diversify effectively. Its portfolio is therefore formed only of indirect investments, consistently made to mitigate timing risks and capitalise on market opportunities. While APK maintains control over regional allocation and capital distribution between managers, the investment mandates are flexible, enabling agility in exploiting market fluctuations and directing capital towards promising regions, sectors and manager talent.

Initially, APK invested substantially in transnational core-plus and value-add funds to quickly achieve diversified exposure, subsequently integrating debt funds to stabilise its portfolio income streams. It has since adopted a thematic and regional approach to exploit regional supply-demand imbalances and pursue higher returns. But while committing to long-term real estate investments, APK also perceives the current challenging environment as ripe with opportunities rather than threats and therefore is ready to invest during periods of market distress and asset disposal.

At present, it favours larger managers that possess the resources to navigate complex transactions and capitalise on distressed assets. Geographically, it maintains confidence in Europe because of low vacancy rates and limited new asset supply. Sectors experiencing robust demand, such as residential, logistics and data centres, are particularly appealing.

The fund’s global office exposure is limited to 18% of its real estate portfolio, primarily in Europe and with virtually nothing in the US. In stark contrast, the broader pension fund industry allocates at least 40% of portfolios to offices. But APK considers that the office market is experiencing a significant transformation, with rapidly evolving trends in home offices, ESG standards, and tenant demands creating a challenging investment environment.

APK’s strategy has delivered a remarkable internal rate of return (IRR) of 7.3% since inception, with a 5% IRR over the past three years, demonstrating consistent and reliable long-term performance despite market conditions.