Market Commentary August 2024

The summer holidays are over, and the strong Swiss franc is prompting the Swiss National Bank (SNB) to maintain its current course. Further rate cuts in September, and possibly again in December, are anticipated. There are even voices suggesting a negative interest rate scenario by the end of 2025. Real estate managers, who have been unable to conduct capital increases over the past two and a half years, are gradually returning and attempting to acquire new capital. For a fund with a premium of 30 to 50%, raising capital is relatively easy. However, the question arises whether these funds can be efficiently allocated. The local real estate market appears to be dried up, as reported by the industry. It is evident that not all investors have the opportunity to acquire high-quality properties. This makes it all the more important to recognize the added value of properties and to maximize their potential in terms of both performance and sustainability year after year. Creating added value through active management is essential since investors are paying management fees, not just administrative fees. Dynamic strategies and greater foresight are needed. The topic of sustainability is often misunderstood. Investors should not expect sustainability to immediately lead to better performance. Instead, sustainability should be viewed as a fundamental requirement for securing the long-term, risk-adjusted performance of a portfolio. Regardless of where the focus lies, it is crucial to ensure transparency and comparability. In the past two years, managers have been preoccupied with financing issues and potential redemptions, rather than proactively creating added value. As a result, the market has recently been dominated by opportunistic investors such as family offices. A bit more activism on the part of real estate investment vehicles would therefore be desirable. 

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