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.
‘Unique advantages’: Rest boosts private debt allocation
Rest has increased its investment to Metrics Credit Partners’ real estate debt fund (REDF) in a move it says will further diversify its private markets and whole-of-fund exposures following a string of new investments across public and private markets.
CIO Andrew Lill said the investment would help Rest capitalise on “attractive conditions in the non-bank lending market”. The REDF will be deployed into Australian commercial real estate loans across sectors including residential, industrial and specialised real estate assets.
“REDF offers an opportunity to grow Rest members’ savings through investment in a diversified portfolio of high-quality commercial real estate loans across residential and industrial projects,” Lill said.
“With its attractive risk-adjusted return profile, we expect REDF will deliver strong results to Rest members. With a combination of higher interest rates and traditional banks scaling back commercial real estate lending, we believe non-bank lenders have a good opportunity to participate in the sector with terms that are typically more favourable than seen previously.”
Characteristics of the domestic non-bank lending market – including lenders charging both a line fee and a margin for assets before they’re constructed – mean it has “unique advantages” over international markets, Lill said.
“As a leading Australian asset manager, Metrics Credit Partners prides itself on its leadership in the Australian asset management space,” said Metrics managing partner Andrew Lockhart. “Rest’s expanded investment demonstrates the value of the REDF and confidence in the fund’s strategic approach.
“We look forward to continuing our momentum together, helping the fund and its members to leverage the distinctive opportunities and continued growth potential within the Australian real estate market.”
Rest recently came onboard as a cornerstone investor for Fidelity’s new logistics real estate fund, chipping in around $130 million as it looks to grow its allocation to impact investments, and handed out a $150 million mandate for Ninety One’s global environment equity strategy, which targets businesses across renewable energy, resource efficiency and electricity. It also made other investments in its impact sleeve across Palisade’s Impact Fund, specialist private equity firm ARCHIMED and the agriculture centred Cibus II Fund.
