Professional investors in Hong Kong can now access a new sustainable real-estate fund through Sarasin Bank on a private basis. The bank has issued what it says is the world's first fund to specialise in shares of listed sustainable property companies - those that are involved in the sustainable construction and management of properties, either through company shares or via real-estate investment trusts.
Klaus Kaempf, an analyst at Sarasin in Basel, Switzerland, says moves around the world to address climate change will have an "obvious" benefit to properties constructed with sustainability in mind. He notes the building sector consumes one-third of the world's energy, due to heating, lighting, air conditioning and so on. "Property is the world's biggest slice of end users of energy," he says. As governments move to address climate change, any reduction strategy of greenhouse gasses must include buildings.
He says the Sarasin strategy is not just about green buildings, but those constructed under good labour conditions and other socially desirable factors. Such buildings do come at a premium, so cost more to construct. Third-party research in the United States, Britain and Switzerland shows, however, that such buildings also command higher rents per square meter, enjoy higher occupancy rates and offer higher resale values.
Such benefits balance out the building cost in the short run, and can add value in the long run, Kaempf says. "That's how we generate performance."
A predecessor fund to this new strategy run by Sarasin has outperformed the Lipper global equity real-estate index since July 2007. This strategy, called the Sarasin Real Estate Equity IIID Fund, was recently converted into the new sustainable strategy (called the Sarasin Sustainable Equity Real Estate Global Fund), so the bank can't provide performance figures for it under this new identity. The fund is denominated in euros.
The fund's current portfolio allocates 32% to the US, 16% to Europe ex-Britain, 13% to the United Kingdom, 13% to Japan, 11% to Australia, 9% to Singapore and 2% to Hong Kong, with 4% invested elsewhere.
It invests mostly in commercial real estate, with offices accounting for about 25% of its exposure, and retail another 25%. It has lesser exposures to residential and industrial properties. It is considered to be of above-average risk. Two-thirds of its currency exposure is to euros, with yen, dollar and other denominations making up the balance.
The portfolio manager is Jakes Ferguson, who also came up with the idea of a sustainable real-estate product. Sarasin is carving a niche among Swiss asset managers in the sustainable space and now manages CHF6.5 billion ($6 billion) of such portfolios.