Blog – The Power of the Boutique

Brexit, political turbulence and a general fall in confidence saw the property investment market marred by uncertainty and caution in 2016. Competition for assets increased and deal completion became harder as the sector reached a late stage in its cycle.

When property investment cycles turn, and opportunities to invest become fewer, attention often turns to those firms able to continue bringing deals to fruition while simultaneously navigating the twists and turns of the market.

In the case of the global financial crisis, it was smaller investment managers that thrived. As larger institutions faced illiquidity issues, agile fund and investment managers secured the best value (mostly off-market) opportunities by moving quickly and taking advantage of the stressed economic environment.

Today, as valuation concerns and Brexit negotiations impact sentiment, it is again those firms employing the most flexible of approaches to investment management that are succeeding.

At Avignon Capital, the proof of this is evident in our figures. In the last financial year, during which property investment levels in some global markets fell to their lowest levels since 2012, we completed a record 25 deals totalling some €565m across the UK and Europe.

Whilst there is no magic formula that helped us achieve this growth, at any point in the real estate cycle it is important to remember that property investment is often an art propped up by the core values of the company doing it. For us, success doesn’t just reflect our investment managers’ knowledge of the property market, but is down to a number of other disciplined processes.

An institutional manger with a large mandate may view a deal under £50m as relatively insignificant or too time-consuming to research, yet we find this area is often where the best opportunities are found. By having a more fluid approach at Avignon, every single opportunity, whether it is for £1m or £100m and regardless of sector or geography, is analysed by our team of analysts and investment managers. It is with good reason therefore that we see little need to make transaction sizes or sector biases a core part of our investment strategy. When putting together a portfolio of properties our target return is the key. That is achievable when we carefully analyse the asset to see how it fits into our strategy; whether it is a few retail units in the UK acquired for a few million pounds or a global brand-backed hotel complex in Amsterdam for €50m.

With none of the benchmark constraints often associated with larger firms, this focus on achieving quality returns equally reinforces our eager commitment to the execution of deals. How many firms take a step back and employ a ‘wait and see’ approach when faced with a difficult market? As a smaller operator that places an emphasis on due-diligence, when the decision to buy has been made we understand the need to move efficiently and remain dedicated in spite of outlying market noise. This is how we have carefully grown our assets under management to record levels over the past year.

The power of a small firm is rooted in its track record and success can be far-reaching for an investment manager like us, particularly in a sector such as property where large firms dominate. As the property sector tides begin to turn again, perhaps it is time again to hail the agility of boutique investment managers once again.

 

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