Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
‘So obviously should happen’: ISPT, IFM Investors mull merger
The merger, first reported by the Australian Financial Review, would create a $233 billion infrastructure and real assets manager and is being explored at the request of “significant shareholders in each entity”.
“A potential merger recognises that IFM and ISPT have complementary businesses and capabilities,” IFM said in a statement. “They also have an extensive common shareholder base. Any merger must create value for the shareholders and unitholders of IFM Investors and ISPT and deliver strong financial outcomes for their members. Discussions are ongoing between the organisations as they seek to identify and assess the opportunities and risks for their shareholders, investors, businesses and people.”
While the synergies are obvious, the two organisations have never been in formal or informal merger talks before; a 2018 joint venture that would leverage IFM’s strong presence in Europe with ISPT’s property experience to invest in gateway cities in the UK and Europe was kiboshed by the pandemic and Brexit. Those two events changed the risk profile for a number of cities (but particularly London), and the JV was quietly abandoned.
Industry fund sources said that the merger talks have been going on since at least last year and are significantly progressed, and that the merger will probably go ahead. One source at a large fund said the merger “so obviously should happen” owing to the similarity in the two organisations’ activities.
ISPT was launched as Industry Super Property Trust in the early 90s, when the property crash sent values plummeting and cleared out many of the existing unlisted property trusts. At the time, the actual commercial properties were selling on attractive yields with strong tenancies. Westpac Financial Services was the initial manager though management was later insourced. While commercial property has been challenged in the short-term ISPT has a robust track record, though its FUM has hit a wall as superannuation funds set up their own unlisted property platforms
ISPT was also set up as a not-for-profit fund manager – and shareholders, which include AustralianSuper, Cbus, and HESTA, sit on the board – while IFM was a more independent for-profit manager owned by the industry funds; that model was perhaps better suited to growth and globalisation, and offshore clients now contribute a greater chunk of revenues than the industry funds. Its current CEO is David Neal (pictured).
