UBS Global Asset Management Urges Diversification to Avoid Over Exposure to
Global real estate attractive, avoid risks of downdraft after long run of high
ZURICH -- March 24, 2014
Real estate around the world is in an upswing, presenting a golden opportunity
for Canadian investors to diversify away the risk of being overly exposed to
their home market, said Richard Johnson, Managing Director of UBS Global Asset
Mr. Johnson was among a number of leading investors quoted in today’s Globe
and Mail Report on Business article Real estate’s next worry: commercial
property that explores the risks associated with Canada having one of the
hottest commercial real estate markets in the world. Canadian commercial real
estate has delivered a 10-year annualized total return of 11.9% according to
Investment Property Databank. That’s the highest of all developed markets
covered by IPD, and second only to South Africa in that time period.
“With most Canadian institutional real estate investment focused on domestic
real estate, pension funds could be seriously overexposed in the event of a
downdraft in the market,” said Mr. Johnson.
“At the same time, we are expecting attractive returns over the intermediate
term in some markets in Europe and Asia, so this is an excellent time to think
about diversification and look at opportunities in those markets,” he said.
UBS Global Asset Management Real Estate Research & Strategy is forecasting
positive intermediate-term results centered on 6% total return for the
Canadian market. William Hughes, Global Head of the Group, suggests that
near-term performance will be more impacted by perception and pricing than
fundamental changes; the timing of which is very difficult to predict.
"Canadian commercial real estate has enjoyed the status of safe haven,
attracting new investment capital and driving down yield. If capital becomes
less risk averse and seeks higher yield, commercial real estate values may be
affected" says Hughes. Investors can observe changes in market supply and
demand but perception may change quickly or may not change at all.
Given the recent universal success of commercial real estate markets across
Canada, diversification could be sought through investment outside the
country. “UBS Global Asset Management is starting to see improvement in some
of the markets that were hurt during the global financial crisis. Growing
confidence and increasing yield desire may lead investors to diversify their
domestic exposure,” said Mr. Hughes.
About UBS Global Asset Management
UBS Global Asset Management is a large-scale asset manager with businesses
diversified across regions, capabilities and distribution channels. It offers
investment capabilities and styles across all major traditional and
alternative asset classes including equities, fixed income, currencies, hedge
funds, real estate, infrastructure and private equity that can also be
combined into multi-asset strategies. The fund services unit provides
professional services including fund set-up, accounting and reporting for both
traditional investment funds and alternative funds.
UBS draws on its 150-year heritage to serve private, institutional and
corporate clients worldwide, as well as retail clients in Switzerland. Its
business strategy is centered on its pre-eminent global wealth management
businesses and its leading universal bank in Switzerland. Together with a
client-focused Investment Bank and a strong, well-diversified Global Asset
Management business, UBS will expand its premier wealth management franchise
and drive further growth across the Group.
UBS is present in all major financial centers worldwide. It has offices in
more than 50 countries, with about 35% of its employees working in the
Americas, 36% in Switzerland, 17% in the rest of Europe, the Middle East and
Africa and 12% in Asia Pacific. UBS employs about 60,000 people around the
world. Its shares are listed on the SIX Swiss Exchange and the New York Stock
Gregg Rosenberg, 212-713-8842
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