Sarasin retools real estate fund for sustainability

London, 16 July: Asset manager Sarasin & Partners has launched a long-only equity fund that will invest in global sustainable real estate companies and real estate investment trusts (REITs).

The Sarasin Sustainable Equity – Real Estate Global fund is a retooling of its long/short Real Estate Equity IIID fund, which launched in April 2007 and had attracted around €8 million of investment.

London-based fund manager Jakes Ferguson said the earlier incarnation of the fund had achieved what it set out to do, returning 17.3% above its benchmark index through a defensive investing style. But he said, in the current environment, “it’s better to go for long-only funds. It was never likely to keep up in a recovering market.”

The relaunched fund selects companies from the 400 in the S&P Global Property Index and employs two sustainability screens.

“We have looked at sustainability in global real estate for over 12 months, and find this issue right at the top of the agenda for many Western REITs and property companies. We are sure that sustainability will continue to grow in importance in Asia,” he said.

Ferguson said the vast majority of investors backed the repositioning, with only one significant investor withdrawing to invest its cash another Sarasin fund. Sarasin manages around $395 million in real estate funds, he added.

Zurich-based sustainability analysts Asset4 perform the first screen, whittling the number of companies down to 160 from 400. Bank Sarasin’s Basel-based sustainability team does another analysis, reducing the tally to 65 investable companies.

Ferguson said the sustainability screening results in some interesting weightings – for example, 30% are US companies, underweight compared to the global index, while the UK and Australia are overweight at 12% and 11% respectively. This is a reflection of how far sustainability issues have been embraced in these countries, he said.

Among the real estate firms that the fund has invested in at inception are Australia’s Stockland, and UK-listed firms Big Yellow, Hammerson, Land Securities and British Land.

“Real estate is a significant culprit in the production of greenhouse gas emissions. I think we will see development of a two-tier market,” Ferguson said, where buildings meeting high sustainability standards are valued higher than those with no sustainability credentials.

The Luxembourg-domiciled fund is benchmarked against the S&P Developed BMI Property TR Index and is open to institutional and retail investors.