The role of UK property in client portfolios

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  • 34 mins 31 secs

Learning: Structured


  • Guy Glover, Manager, BMO UK Property Fund, BMO Global Asset Management
  • Matthew Howard, Director, Property Funds, BMO Global Asset Management

Learning outcomes:

  1. The characteristics of UK property as a portfolio diversifier
  2. The pros and cons of open ended and closed ended real estate funds
  3. How fund managers look to ensure liquidity in their portfolios
Channel: Property
London • Harpenden
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Mark: With so many investors looking to diversify their portfolios, what can an allocation to UK real estate do to help? Well, that's one of the topics we're gonna be looking at in this Akademia session with the help of Guy Glover, Manager of the BMO UK Property fund and Matthew Howard, Director of Property funds at BMO real estate partners.
Well, let's start by looking at the learning outcomes for this Akademia unit. First, of all, the characteristics of UK property as a portfolio diversifier. Secondly, the pros and cons of open ended and closed ended real estate funds and finally, how fund managers look to ensure liquidity in their portfolios. Well, when the pair came into the studio, I began by asking Matthew Howard about the characteristics of UK property and the role it plays in an overall portfolio.
Mark: Well we're about to kick off, what would you say the role of UK property is in an overall client portfolio?
Matthew: Well, I think property is a diversifier, you know, there’s two key elements to commercial properties, the income return and the capital return and the income return is fundamental to property, if you go back to 2001 property returns, the income element has been about 76% over that period and in the short term, 5 to 10 years it's been at least over half, so the underlying returns from property is that strong income element with the prospects of capital growth. So, it's kind of a hybrid asset class somewhere between equities and bonds.
Guy: I think it's quite important to realize where forecasts are over the next say, 3/5 years, most of the returns are now gonna be coming from the income component, that's a nice addition to an investor’s portfolio.
Mark: How much correlation does it have to equities and bonds? If it's a hybrid, does it really make much difference to an overall portfolio?
Matthew: The correlation isn't particularly strong. You know, I think the correlation to equities over the last 20/30 years is about .4, the correlation to guilt is actually slightly negative, so it's not highly correlated. But that means that property is a good diversifier in a balanced portfolio.
Mark: And how does it respond to stock market in economic cycles in general, when are good periods for property, when are less good periods?
Matthew: Well, I think property, it doesn't necessarily respond particularly to the stock market. You know, the two fundamentals are separate. Property is a very nuanced space and the returns for property is based on the specific asset, the underlying fundamentals of that asset, and that could be quite different from the stock market. The property stock might be highly leveraged. It might focus on a specific sector, or region or even other higher development exposure. So, really, the two aren't particularly correlated.
Mark: I suppose another thing that investors will think about is, you know, they might hear about property and think that sounds interesting, what percentage of their overall portfolio should be in property?
Matthew: Well as an alternative asset property is usually about 5/10 maybe up to 15% of a portfolio. Asset Allocators would look to put that kind of weighting in a balanced portfolio, and it really depends about, depends on the investors appetite for risk and what their return requirements are.
Guy: What we are seeing more recently is people looking at property as a corporate bond proxy, it has long term income, secure contractual income, but also has a far higher yield at 5% + in the monthly index compared to corporate bonds, which are 2/2 and a half percent. So, we're seeing some asset allocation increasing the property exposure because, of course, it offers a corporate bond like return, but the yields have been squeezed due to QE.
Mark: And Matt, if you're looking at property, I suppose there’s property companies out there you can invest in or there's the buildings themselves, the bricks and mortar. Can you talk us through what the attributes of each of those two are?
Matthew: Yeah, I think, with the property companies it's about the diversification. So, with the REIT regime in the UK, investors have quite a broad church of sectors to be able to invest in without specific sectors like healthcare or PRS or balanced commercially conservative portfolios, so that gives investors some diversification and the ability to trade shares on a fairly liquid product. If you're investing directly into real estate, obviously it’s specific risk on a specific asset unless you are a high net worth individual, you're not necessarily gonna have the bank balance to be able to invest directly in commercial properties. So, the trust gives a degree of diversification.
Guy: So, I was just going to say that the open ended funds universe enables you to get bricks and mortar exposure, same level of diversification across the various sectors, but also pricing isn't linked to the stock market, it's very much more linked to the underlying asset being valued on the NAV of the funds at any one time with unit's being sold at NAV, which is an important aspect and a sort of halfway house between owning properties directly and owning REITs.
Mark: But if you own a REIT or a property share, Matt, in terms of its performance characteristics, does it act more like the underlying bricks and mortar buildings? Or does it tend to act much more as a proxy on the stock market?
Matthew: I think it's fair to say it acts more as a proxy to the underlying bricks and mortar, you know, certainly over the long-term basis. I mean at the moment, for example, property stocks, if they have high weightings to retail or any weighting to retail, their discounts to NAV to reflect the downward trend in retail values, which I think is fair, maybe that's overstated in the short term, but it's a comment on the underlying bricks and mortar and ultimately, it's the underlying bricks and mortar from a balanced portfolio, which drives the performance of that vehicle.
Guy: So, we are seeing some shopping centre REITs out there being traded at a very big discount, their underlying NAV, very much forecasting further falls in that market and so it is forecasting what's going to be happening rather than their current, and it may be their current NAV.
Mark: So, when you look out across the range of property equities there's a real variety in risk and reward and a mandate that's out there?
Guy: Yeah, from the specialist REITs, which may be long term, pseudo government backed income, all the way to a diversified REIT, but specialist ones like industrial REITs, which could add something else. But you’ve always gotta understand what's happening to the underlying assets behind that, where the growths coming from and when that growth cycle may turn.
Mark: And for investors in the UK that I guess there's two vehicles that you can be, there’s the open-ended vehicle, which Guy, I know you run. And then there's a closed ended vehicle, which I know you've helped to run as well, so let's just go to the open ended one first. What are the pros and cons of the open-ended approach?
Guy: OK, we would say that they open ended approach very much provides you with a truer level of diversification being linked to the actual underlying asset class rather than being linked maybe more to the stock market. But it's actually worthwhile taking a step back because at BMO Global Asset Management we offer a complete set of exposure from segregated mandates. So, open ended funds, to REITs, to also hybrid vehicles, property growth and income and also listed global real estate vehicles. So, what we always say to our investors is what are you trying to achieve with your exposure to UK commercial property and that's very much the starting point because each of them has their pros and cons, going back to open ended vehicle, obviously, we provide greater level of diversification, We provide steady income return, but there is a liquidity aspect where we hold a certain chunk of the vehicle in cash to provide that daily liquidity which the platforms require.
Mark: So, if I'm investing in an open-ended property fund it sounds like what I'm actually investing in is a bit of property and some cash. What sort of cash buffet do you would you run?
Guy: Okay, Typical with your cash buffers around 15%. At the moment It's slightly elevated because of some political risks out there, but they wax and wane and a sensible level is around 15% slightly above a longer-term target of 10 to 12%. It does drag down the income return at the current time, but it's important to provide the sensible level of liquidity. Importantly, the investors appreciate that, investors appreciate that cash is there to provide that liquidity. They are getting exposure to the commercial property market from the majority of their holdings and sometimes their manager may tactically increase their cash holdings to reflect what's happening in the market. They may see opportunities coming through in 6/9/12 months’ time.
Mark: In terms of the price one pays for all of this as an investor, does that mean it's considered good practice in the industry to charge, you know, an active management fee only on that 85% that's in property and the cash is something else, or do you judge across the piece. What's typical?
Guy: Okay, Typically, you will charge a fee across the whole fund. However, two years ago, the BMO UK Property fund did introduce a rebate for a certain element of the cash holdings above the structural level so that the investors weren't being penalized, it really shows the cooperative approach we have with long term holders of the fund and ensuring that it works for the actual holders, the unitholders, as well as for the manager, it strikes that fair balance.
Mark: You did mention a bit of political risk there in one of your early answers, and I can remember it was 2016 just after the Brexit vote, there was quite a lot of the open ended funds got what so called “gated”, people weren't able to get their money out, can you talk us through what happened. What were the lessons that got learned then? Or perhaps investors have forgotten who were an open-ended property funds.
Guy: Okay, so it's probably worthwhile just reemphasizing that in 2016 there was a liquidity event which did cause some funds to suspend. It's interesting to compare that to 2007, 2008 with global financial crisis where none of the authorised funds were actually suspended, they were able to offload liquidity. So what's the big difference between the two? The big difference is that the investors in 2016 become a lot more concentrated. Those big multi manages out there following RDR changes were bigger players and when they moved money, there was just too much money in multi managers. BMO UK Property Fund is a slightly different makeup. We invest with smaller, longer term investors in the fund and we ensure that no one has more than 5/6/7% of the fund at any one time, which limits concentration risk.
Mark: Given you've got quite an illiquid underlying asset class in property, is that suitable for a daily dealing vehicle fundamentally?
Guy: Yes. As I said, look, we didn't spend previously. There was a very small peer group which were suspended and then reopened. Importantly, none of the investors really lost any money during that time. It was a matter of building up their liquidity before reopening again, and it's worked quite successfully. Obviously, people have voted with their feet. Funds, which didn't suspend, tended to attract more money over the last few years, but importantly for us it's getting the right type of holders in the fund, what we're looking for is pension funds, people allocating money on the pension fund, why? They're typically going to be a long term holder. People often say, Well, is liquidity enough at 15%? Well, most people I know, are investing for 5/10/15 maybe 20, 30 years. If it represents 5/10/15% of an overall portfolio, Um, they don't need that money back any time soon, so the vehicle is very suitable for long term investors.
Mark: Thank you, Matt, who would a closed end property fund be suitable for in the round? What are the types of investors it should appeal to and why?
Matthew: Well again, I think with closed end, it's about long-term investment. You know, we're a long-term investor and the close ended nature of the structure supports us in taking long term positions on properties, you know, as a listed trust were listed on the London Stock Exchange and it gives investors a degree of liquidity. Now that liquidity may vary, You know, at the moment we're running at a discount to NAV, as any listed vehicle that has an exposure to retail is, as I said earlier, that's based on the direction of travel for retail values, the direction of travel and the overall discount, maybe debated. But the overall principle, I think, is fair, and therefore they're not always fully liquid I suppose. But that's the same for any listed business.
Mark: And what's sort of cash position, given that this is a share, so if I wanted to get out of your fund, I would have to sell my share, to another person in the market. We could argue over the price of that, but I could get out, given the underlying portfolio doesn't have that problem of redemptions. What cash position would you run in the fund, typically?
Matthew: Well, we always have to keep a cash buffer, you know, we business plan constantly we look at the casual climate for the properties, whether we're reinvesting in the property or whether we're looking at the point in the cycle and think it's a good opportunity to invest in further opportunities. We do have a rolling debt facility that means that we can invest if we don't have a high cash position so typically would look at say maybe five, maybe 10% maximum at any one time, but probably, probably, typically lower.
Mark: You mentioned you could borrow or gear in the portfolio. Typically, what's considered to be a sensible level of gearing in a closed ended fund investing property?
Matthew: We take a pretty conservative approach to gearing were just around 20% of the moment on. We think that creative to performance we're not expecting or intending to increase that weighting. And I think anyway, once you get past around 30% gearing, your risk adjusted returns are a marginally decline.
Mark: One of the stories you always hear from the investment trust industry is the ability to keep some of the income back so you can smooth it out over time. Is it, how strong a part of the story is that particularly, I think, within property. The close ended structure, most people favour the REIT, which from memory is one where you have to pay out, you get the status, but you gotta pay out most of the income.
Matthew: We pretty much distribute most pretty much all of our income. The REIT regime means that you have to distribute 90% so that's in in line with our with our structure and the REIT regime in general suits the structure of the fund. You know, the other criteria, such as 30% development exposure, were conservatively run trust, our development exposure at the moment is pretty much zero, but maximum, I've got to say 5%. So therefore, again, none of the REIT regime rules set any challenges to us. Really.
Mark: One other quick thing on the closed ended, since, investment trusts have got boards, so you're running the money. But what influences does the board have on strategy policy, holding you to account?
Absolutely. But our border nonexecutive directors and therefore, it's a governing role as opposed to an executive role. Really it's cheques and balances to ensure that we're governed appropriately. Whether that’s our ESG regime, whether that's our strategy, is being adhered to and really a cheques and balances approach. They're very experienced sets of individuals, and we meet on a quarterly basis or more regular where were required.
Mark: Picking up on one of those points from earlier, property is quite a liquid asset class in the round and Matt, you referred to trading property shares and its quite hard to know what the NAV is and the discount to NAV, how should investors think about that?
Guy: Okay, so how open-ended funds actually valued? We have an independent valuer light frank for us. Currently, they value the fund on a monthly basis. It's totally independent. Yes, we do fill in information for them on a monthly basis, keeping them updated on asset management initiatives, which may affect value, talk to them about sales or potential acquisitions and that's the important process we go through so you can rely on an independent valuer to determine the unit pricing at any one time.
Mark: As with property, I mean unlike if you’re, investing in guilts, it’s probably quite easy to flip a guilt. It's a big liquid market, it’s not as easy to do that properties. How does that, as a fund manager? How does that change your mindset of what you want to buy and what you don't? I mean, there must be time and expense involved that there just isn't-
Guy: There is time and expense involved. First of all, we don't want to put yourself in a vicious position of having to fore sell any assets, you want to be totally in control of that, we do that by ensuring we have long term investors in the fund that's absolutely key to how BMO UK property fund was created. But for them or going into natural asset, the transaction period for selling assets is shortened. If you have a core quality asset with lots of income, which will be sought after in the market, it's easy to understand what a great covenant, they know how long the incomes going to come through and therefore, you can sell buildings in a tightened timeframe if you need to.
Mark: What's a tightened time frame?
Guy: There’s lots of stats out their in relation to how long it takes to buy or sell an asset. I bought an asset for 5 working days where the whole pact was there. There's a motivated seller and we could step in and buy the building, but typically it can take up to two or three months. For the due diligence to be undertaken. It's important to give a potential purchaser time to look at the building, understand what they're buying, do their research on the market. So you get the best possible execution price when you come to sell the asset.
Matthew: And even when the market is strong, last year, we sold a couple in the trust. You’ll typically get maybe 12 maybe 15 bidders for the property if it's sought after and therefore unable to get everybody around the building to see that to do their due diligence to appropriately underwrite, you've got to build in times that, considering you take 1 to 2 months.
Mark: But given the time and expense of that, if you are making an acquisition or a disposal, how does that shape your timeframe on how long you want to hold a property for, presumably, ideally that the fewer times you're trading the portfolio, the better, that's got to be.
Matthew: Absolutely. What I said earlier were long term investors, so we look at things and see a long-term basis and the closed ended nature of the structure supports that the rounds cost of buying and selling property are almost 9%. Therefore, we were holding for a five-year whole period as a minimum. You know, our capital values, all things being equal, are depleted by almost 1 and 1/2 percent over each year over that time, so we've got to be cognizant of that, so typically our whole periods of seven, maybe 10 years and and perhaps longer. So, we take a long-term position.
Mark: And how can you work out that you buy a building? How do you know what the world's gonna look like in 10 years? So, what can you do to give yourself the maximum chance that will still be a high quality building that's desirable in the year 2029?
Guy: It used to just be about location, but there's obviously structural changes out where the reference what's happening, the retail sector at the moment. So, a lot of the discussions we have as an investment committee is about the changing shape of the market. Be that from flexible offices being introduced into the market now, and how we have to respond to that, be it changes online, it actually goes further than that, you’re looking at infrastructure projects, how that might actually influence a location, regeneration the areas. So, we've recently bought a building in Kings Cross, which we re-let up, higher rent, taking advantage of the improvement in that area, increasing the income term or the income length of that building. And that's an important thing we were looking at what's happening in that market. Regeneration projects can take a very long time to come through. They tend not to be one or two years. You're looking at 5/10/15/20 years. You have to take a very much long-term approach, buy building where it might be unfashionable, hold it whilst the regeneration happens and then look at exiting once you've caught the growth.
Matthew: We talk very often about buildings being future proofed. What does that mean? So for us It's about picking up long, long term trends. I'm relatively new to the business so I can't claim this myself but BMO as a business sold their last shopping centre, I think about 12 years ago, because they took a long term view on retail. Internet sales are about 2% of overall retail sales in the UK about 10 years ago. They're now about 20% just over 20% where they end up where the equilibrium point between online and physical. We don't quite know what we know that that sector is under a degree of pressure. So it's about picking up those long term trends and even though it's been a lot of headlines about online retail in recent years or particularly in the last 18 months. It's not an overnight sensation. It's been a slow burning trend that's really been, trained for over 20 years.
Guy: And, we’ve got to adapt to that, so when we launched BMO UK Property Fund, we very much looked at cathedral towns and cities where there's tourism spend to give us a defense to the rise of online, to an extent that’s worked, but the important thing is you’ve got to adapt, so we all just saw that the market was developing further, they want primary locations, the demand from retailers were producing, we took a decision to exit some holdings and Worcester and York, good locations. but we thought that actually the next, there would be a decline of rents over a period of time, therefore It's sensible to get out early, so you can buy for the long term. That you shouldn't be wedded to that strategy.
Mark: You mentioned cathedral cities, I mean what happens when you take a place like Salisbury, where you know, awful events there a couple of years ago, but I mean that's completely outside what you can plan for, if you're in somewhere like Salisbury, do you just have to ride it through? Or is that a reason to make a quick exit?
Guy: Okay, you're less likely to make on the spot exits. You’ve got a business plan, you would follow it through. We're investing for the fundamentals, so we have to see through short term political or one-off events which might affect a region and say, actually, what's the fundamentals demand to supply in that area over 5/10/15 year period? Because that's going to drive rents. And that's the important aspect.
Mark: Clearly, flexibility is a really important part of this once you got the building. So, what are some of the things that you can do that add value to that building over time as we would probably call the asset management. What can you do?
Matthew: Yes, certainly. Well, I always call the asset management the life blood of our business, it’s what drives performance of our assets and at BMO, we have a best in class asset management team. So, they're working relentlessly on generating value, securing the value of those assets. So, first and foremost, it's really important to understand the markets that they work in, to understand the tenants what the tenants want and therefore when we’re reinvesting capital on the property. They're doing so on appropriate basis. So, the things we can do, I take, say, for example, our offices portfolio. The office market is evolving. There's a lot of noise and headlines at the moment about serviced offices, for example, but the majority the market still take so called grown up leases on bigger space. But those occupiers that may have been in serviced offices are graduating into a bigger space. They want a certain degree of service that they've been used to. So, at the moment in our office portfolio we typically offer plug and play space where we put the connectivity in advance. Put in some of the furniture and the desks etcetera so the tenants can move in and get to work a lot quicker. Now they may be taking slightly shorter leases, but they're paying a high rent for that. And that's responding to change because we're responding to what the tenants want once and ultimately were a service industry.
Guy: And the asset managers can also manage downside risk. We had a Homebase going into a CVA last year, but we're aware of it and we could, therefore, put forward a plan, so our retail warehousing asset management team decided to de-risk one of my assets which was in Ipswich, it was let to Homebase, short term income, but they were able to agree a new lease with B&M on a 10 year term ahead of any problems happening with Homebase, so called an insurance lease. What did that do that underpinned value for the asset and underpinned income return and therefore managed the risk? And that's the important side. It's not just always adding value, which they do extremely well. But what they are doing also is actually preserving value if your faced with more difficult situation.
Mattthew: And a good example of that would be Newberry Retail Park, which is the large retail park that the trust own. We had quite a tough year last year. We were subject to three CVA’s and one administration. We lost mother care. We lost Homebase, but since then we’ve signed leases to LIDL, Hobby Craft & Diteman shoes and it hasn't been easy and it's come at a cost and it's taken some time. But with the work that we put into the assets. The work from the asset management team, the relationship they have with the occupiers that we can provide the right space for the right occupier.
Mark: So, did these potential occupiers know about Newbury Park or is it about you going out saying, Guys, you really want to come here? I mean, how much of its push? How much is pull?
Matthew: Well, it's a bit of both. I mean retailers, for example, they’re very well advised, they typically have in House Property Team, so they know the market's pretty well and that supports them in their negotiations too. But we get advisers on board and we have property agents which look to let our property. Again, we like to think we choose the right kind of agents. We have the relationships with where they're gonna work hard for us and are well skilled to service the specific property that they're letting. But then when they attract the market, the property, it's then typically, it's conversation led and it's about the relationships you might have with those tenants and that are they comfortable that they're going to get the right landlord who’s gonna respond correctly and to their needs.
Guy: But fundamentally, it's having buildings in the right location. So, there's lots of noise around that retail space, but you can pick winners. We have an asset in Winchester, where we've just re let it at a higher rent after only two weeks of a void. Why? Because your asset management team were in touch with the market, knew who was potentially out there to go in there and it, back in Edinburgh, were at the moment discussing a surrender of release and grant of a new lease at a higher rent than the existing occupiers paying. That's an important aspect. You can still move rents on if there in the right location, but structurally, the whole market is challenged
Matthew: Exactly, and I've said earlier that our asset management team are working very hard. It's a, it’s a privileged position to be in, to be able to work hard because most retailers, for example, are slimming down their portfolios, slimming down the size of units that they're, they're occupying. And therefore, if they're attracted to your park, that means generally it's a good, it's a good testament to the strength of that location.
Mark: And, you touched on it here, but I want the next 2 to 3 minutes to talk through what some of the changes are in property. The structural changes that are going on because it's the way to talk about an asset class. It also implies that it's static, and it's not. A lot is happening under the bonnet. So, in terms of the long-term trends, Guy, let’s start with you. What are the main ones that you you're focused on?
Guy: The big one is obviously retail space. At the moment It represents 35% of the overall index and shopping centres up and down the country are being decimated in those secondary towns and cities, and that's something you’ve gotta be really aware of. Against that, I suppose, it’s all about repurposing, how you can asset manage your way through that and even where you do have a property the nice thing about it, it's a real asset and people are turning their to attention to what the alternative uses are. So one of the best performing assets for myself is actually a retail warehouse. It's in retail. It should be challenged, actually it delivered 30% last year. We're working up a scheme to put 200 new units on that 200 flats on it, absolutely perfect. You got a nice income stream and then upside for a residential scheme in due course, so repositioning assets that could be all important and so one of the major themes we always talk about is actually what are the alternatives for a particular building. You're not just buying a fixed, a building with a fixed income stream. You're saying, What are the uses? You can put it to.
Matthew: I think it's important to step back and remember that markets always evolve, you know, if we jump back 40 years, retail warehouses didn't really exist in the UK, It was really a kind of late eighties/ early nineties there was a boom in retail warehousing, a concept that came from North America. So, it's important to remember that these markets always evolve. So if retail warehouses now being repurposed for more leisure use, perhaps, or repurposed for industrial or even residential again, these are inevitable changes, and, I think even say, the office space. If you go back to the late nineties, early two thousands, there was a bit of a doomsday feeling about home working because of the technology and the increased communications enabled it. People wondered, will we need to occupy offices anymore? But of course we do, because, obviously human communication, human contact is a fundamental part of business, but the two work in harmony and there's much more flexible working and perhaps smaller, smaller office floor plates for occupiers. But again, it's a long-term trend that something that kicked off really 20/25 years ago, but they never stay static for long.
Mark: What about ESG, that seems making a really big impact, particularly in the institutional space?
Guy: Actually, it's across the piece. I'm out talking to investors the whole time about the ESG credentials or property funds. Nice thing about properties. You can actually intervene on the ground. But it's important not only to the investors, it’s not only important to us, but also to the occupiers. What you’ve got to do is make sure you address it across the piece at fund level, but also when you're managing a building. So we've been doing it for many years now, across the piece. When we're buying a building, we review it to see how we can improve that asset, when they operate the building. How we can run it exceptionally efficiently and also it can take, you can use it to make decisions to sell an asset, maybe feel there’s increased flood risk in an area because flood maps have changed. Then you might actually review that holding because the flood maps might indicate that it's a one in 100 year floods when previously is one in 1000 years. So you’re responding constantly to that. We review each of our buildings once a year, have a thorough review from the ESG perspective. Look how we can improve it. It's just not the environmental side. The BMO UK property fund, has been having 100% renewable energy for many years now, both electricity and gas. So we'll sort of tick that box in relation to the energy. We're very much looking at the social side now, So we were the first fund to be accredited with living wage. Next year, we hope to be introducing zero waste to the landfill and our big initiative for 2021 will be single use plastics free and how we operate our buildings. So you never stand still and you just want to improve constantly, and that's being reflected in our improved GRESB scores.
Mark: I must ask as somebody who does a lot of out and about shopping, every shop I ever go to. They always leave the door wide open and the heating on in winter. Can you as a landlord say to people, actually, that's really not very green thing to do. You must now shut your front door.
Guy: Okay, so we have quite a lot of engagement with our occupiers. We try and improve their recycling within schemes. But some operational issues are very difficult to do on the ground. We have been leading the charge in relation to including green lease clauses in there where we're trying to ensure that the occupiers used their buildings in a very responsible way, for me, it's a matter of engagement. Speaking with people on the ground, I'm trying to get them to change their ways.
Matthew: In ESG, property has a huge role to play, in ESG,I mean, you think about the built environment. The quality of where people live, work and play is based on the quality and the attractiveness of the built environment. The real estate that we own manager on develop. I think the challenge for the industry of late has also being about the data and the recording of data, because there's been limitations in what data you hold as landlord. And once you can get that to a quality level of consistent level of reporting, then you can start benchmarking yourself. Then you can start setting targets. Tangible targets. You can measure yourself against and improved, so big parts of the ESG agenda, the G being governance, about the overall governance and making sure the effort is put in and the right resources there to be able to respond and control your data and performance
Mark: Just to sum up. Because we talked through a lot about the asset class, ways of running money. If investors thinking about putting money, the property fund manager, get a thought from each of you, what would your tips be for what they should think about before they commit the cash?
Guy: First of all, really think how you're using that as part of your wider portfolio? Is it an allocation call? What level of volatility are you looking for? And how long you're likely to be holding the asset because that will determine the type of vehicle you should be entering. But actually, the big thing about property is its income and that will continue to flow and will be a great addition to anyone's portfolio.
Mark: Matt.
Matthew: Well, I think it's important to look at the manager. Look at the resources of the manager. Can they, do they have the inhouse expertise to fulfill the strategy which they set out to achieve? I think that's very important. It's important to look at that beyond the long-term success record of that, of that house. But also, what are the requirements for the investor, you know? Do they have a specific sector that they have got strong research on that they want to act on? Do they want a more conservative, conservatively run balanced portfolio such as a trust. So, I think property generally as a long term investment.
Mark: We have to leave it there. Guy Glover, Matt Howard, Thank you both very much.
Guy: Thank you.
Matthew: Thank you.

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