“If there is one major trend across all countries and all client segments, it’s the demand for yield.” So says Philippe Lecomte, CEO of La Française International. His clients are all having to respond to the same challenges – in the short term, equity markets have been very volatile; in the long-term, interest rates have bottomed out.
“I meet a lot of clients and it’s the case for both institutional and retail clients – they are all demanding the same. They want yield as a key componentto their portfolios.” This is clearly not a new trend, but Lecomte says it is as strong as ever following the recent market turmoil. And one of the places that this hunt for yield has moved them is back into real estate. “Some lean more towards residential– as is the case in Germany – others lean towards commercial real estate; some want direct real estate ownership, others want financial real estate – shares of property companies. But either way, the demand is there.”
Another clear trend concerns the domiciles of these funds, according to Lecomte. “Real estate is local, so they want local funds – German funds in Germany, OPCI funds in France, and so on,” he says.
And as the demand for real estate rises, the consultants have to keep up. “What we are seeing over the past three years is that the consultants who were not very active in real estate now have resources dedicated to the asset class,” he says. “Today, in the consulting field you have specialist property teams and that has been a big change on the consulting side.”There has also been a shift in demand from consultants away from using pre-existing property funds and more towards asking asset managers to create bespoke real estate portfolios for clients.
Real estate is not the only major asset class to have profited from the recent state of the markets. Another big response to the increased volatility in the equity markets – and the wider macro environment – is a major demand for absolute return products. “Italy is the best example,” says Lecomte. “There, demand is huge for these sorts of funds. But it’s also the case in France and Germany.”There are many different sorts of absolute return funds, of course, and every client’s needs are slightly different.”