universal spotlight: The entire investment world has been hit by the corona crisis. Looking back, how did you fare in the first half year of 2020 and how have alternative investments performed in the crisis?
Dr. Sofia Harrschar: We noticed early on that the clients’ appetite was undiminished. There are still, in my opinion, few other options and a lot of investors were lagging behind in their alternative investment allocations. In addition, some investors are turning the crisis into an opportunity. And finally, a number of investors realised that it helps to have a partner at your side to take over your administration and risk management. As far as the market is concerned, we are still seeing a strong demand for alternative investments. This may be due to the fact that valuation adjustments have been fairly moderate so far and that the lower frequency of valuations leads to less volatility. Our clients have fared well in the crisis so far and are starting to boost their investments in alternatives again. After tailing off slightly in early summer 2020, investment volumes are currently at very high levels. How the current crisis will affect investments in alternative investments in the future will probably not be fully understood for a few years.
Axel Vespermann: Early 2020 was marked by sharp growth and strong investor demand in real estate. Then Covid-19 struck. Unlike in the global financial crisis of 2008, it was soon evident that only parts of the real estate sector were affected. Hotel and retail property prices – particularly in Anglo-Saxon countries – fell rapidly and in part sharply, while residential and logistic property prices were largely unaffected. Corona came as a shock but it was not as bad as some had feared. In 2008, substantial losses were recorded across all asset classes, while this time round, losses were far more differentiated. In real estate, we are expecting sharp growth to resume after the “corona dip”. Covid-19 will keep interest rates low for even longer. We would therefore not be surprised if we saw new highs in transaction volumes and purchase prices.
How do your fund initiators and institutional investors view alternative investments at the moment? Has there, in your view, been a change of mind?
Risk awareness has already increased.Dr. Sofia Harrschar
Dr. Sofia Harrschar: Risk awareness has already increased. During the upturn in the last 12 years, we repeatedly stressed the importance of stability to our clients. At times, there were situations where this advice was not necessarily heeded. Security is more of an issue now because diversification is crucial in times of crisis. Alternative investments can make a valuable contribution to a portfolio’s diversification.
What is your opinion on ESG issues now that climate concerns seem to have taken a backseat to the coronavirus pandemic?
Dr. Sofia Harrschar: One certainly gets the impression from the mountains of disposable dishes, that the climate crisis has faded into the background. At the same time, pictures of clear water and fish in the canals of Venice and of the smog-free view of the Himalayas from Indian cities have highlighted unequivocally the extent of the today’s normal pollution levels. It is vital for all of mankind that we work towards a more sustainable environment. Climate activists will continue to take to the streets for this very reason. As far as alternatives are concerned: ESG is a highly-relevant issue. Demand for infrastructure, renewable energy and other ESG issues has not subsided.
What is Universal-Investment’s strategic direction?
Axel Vespermann: We are currently in an internationalisation phase and plan to set up new locations in Dublin and Hong Kong. This is good news for investors from our region and it also provides a platform for investors abroad.
Dr. Sofia Harrschar: Demand is strong both at home and abroad for partners that take over the administration and risk management of alternatives. Alternative investments have a far greater weighting in the rest of the world than in Germany. Excluding real estate, they account for about 10 per cent of overall investments in Germany. Globally, the share is usually far higher. On that note, we launched a new investment platform in Luxemburg in June 2020 to provide institutional investors with far easier and faster access to alternatives.
(published March 2021)
Author: Dr. Sofia Harrschar and Axel Vespermann, Universal-Investment
Date of issue: 6/29/2021
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