In advance of the event, Delano spoke with Jervis Smith, country managing director at Vistra Luxembourg. He moderates the “The future of REIFs” panel, Wednesday 27 November at 9:30am.
Aaron Grunwald: What do you want the audience to get most from the “The future of REIFs” panel?
Jervis Smith: I would like the audience to take away a solid understanding of the growth of real estate investing through funds, and the practical considerations of the leading advisers when deciding where to locate their new funds. The panel will consider risks, returns, as well as the merits of Luxembourg versus those of other jurisdictions such as Cayman or Guernsey.
The number of Luxembourg-based REIFs has held steady in recent years; do you expect the segment to grow?
Whilst the number of funds may have remained consistent in Luxembourg, as ever the devil is in the detail of the data. We see a consistent trend toward more open ended product issued by managers whilst inflows to existing product is very strong. We also see significantly larger closed ended funds product launched in recent years compared to circa five years ago. We need only look to investment markets to evidence the strong capital flows into the sector and the impact that’s having on yields as well as geographic and asset type allocations.
As institutional and private wealth investors seek higher returns with some stability the expectation is that this growth will continue.
Luxembourg’s advantages have led to it emerging as a jurisdiction of choice for corporations, institutional and private individuals willing to accelerate and adequately structure their business, within and far beyond EU borders. Real estate investment vehicles may be set up as regulated schemes, so subject to the supervision of the CSSF (Part II funds, SIFs, SICARs), or as unregulated schemes (SOPARFIs). Vistra is seeing interest right across the board.
What types of investors are most attracted to Luxembourg REIFs, and why?
One of the panel members is from Inrev, the European Association for Investors in Non-Listed Real Estate Vehicles, and will shed some light on what they are seeing, but for me the inflow of cash into real estate funds is coming from three principal institutional investment sources: pension funds, insurance companies and sovereign wealth funds. The core underlying drivers of this are: a long term shift in the allocation policies of institutional investors as their approach to liquidity and desire to diversify investment risk has developed; a historically low interest rate environment that’s encouraging investors to seek improved yields from real estate; and short term currency weaknesses in some markets has encouraged currency exposure diversification through the asset class.
Aside from your own talk at the Alfi event, which speech or panel are you most looking forward to hearing, and why?
We are very keen to press the case for socially responsible investment and sustainability in general, so I am looking forward to Sachin Vankalas from Luxflag talking about the latest development in this with regard to private equity investment. [Editor’s note: Tuesday 26 November at 4:15pm].