Each year, the AREF Board agrees a number of near-term strategic priorities. These provide a focus for the association’s executive team and all the AREF Committees. Outlined below are the current five priorities that have been identified for the association, to be addressed concurrently with all our business as usual activities.
Probably the most important issue currently facing the UK property funds industry. The solutions developed in the next few years are likely to shape the industry for the next few decades.
The UK pensions system is moving from a DB basis (defined benefits) to a DC basis (defined contributions). Most DC schemes operate through platforms that only deal with assets which are priced and traded daily. This limits the range of property funds to which DC savers can have access.
AREF will continue long-term interaction with the Government and regulators, alongside The IA, also involving investment consultants, the PLSA, the Property Industry Alliance and the ecosystem of depositaries, transfer agents and platforms. The ultimate goal is to deliver an internationally competitive UK long term savings funds regime to allow DB, DC and individual savers access to the full range of real estate and other illiquid asset classes.
Company Voluntary Arrangements (CVAs) were originally designed to give struggling businesses protection and an opportunity to recover without going into full administration. They are increasingly being used as a strategic business management tool by tenants who are not in serious difficulties. Leases have been further compromised by the moratorium on evictions put in place in response to COVID-19.
In combination these measures unfairly move risk away from tenant businesses and onto savers and pensioners, undermine the sanctity of contract and the rule of law, and reduce the attractions of UK property to overseas investors.
As such, AREF is engaged with the Government, alongside the IA and members of the Property Industry Alliance (PIA), to address these fundamental issues, the threats to the pension system and to the attractiveness of UK real estate as an investment.
The UK property industry is well-served with many initiatives around diversity and inclusion, both cross-industry and sponsored by individual firms, but there is more to do.
AREF has a close relationship with Investment 20/20 (I20/20) and aims to work with them to extend I20/20’s excellent work into the property investment industry.
Elsewhere, AREF will seek to co-ordinate, facilitate and amplify the many cross-industry initiatives which already exist. Accordingly, we have set up the AREF D&I Taskforce, which has prompted a tremendous response from members. For full details, please follow this link.
This issue will assume greater and greater importance over the coming years as it affects the ways that properties are valued, portfolios are managed and clients are communicated with.
With the increasing adoption of artificial intelligence, interlinked technological and social developments are changing the way that AREF members must interact with their customers. Large datasets, accurate and up-to-date, are now available and are continually becoming easier to process and deliver.
This data availability also means that investment decisions can be informed by a wider set of information than ever before, and those managers who are able to do this well will be likely to have a performance advantage.
AREF should seek to scope out the territory with members, the Investment Association (IA) and other partners, developing appropriate research, education and governance activity.
Property is responsible for around 40% of UK carbon emissions and creates the environment in which we live, work and play. Property funds therefore have a crucial role to play in the ESG agenda.
Environmental: Through initiatives such as GRESB, which AREF supports, real estate is in a leading position among investment asset classes with regard to measuring and managing environmental impact. AREF will be working with GRESB, members and other partners to consolidate our industry’s position as a leader in this field.
Social: Property has a profound effect on people’s lives through architecture, the design of buildings and public spaces, and the training and development of its own employees. This is likely to become even more important during the “build back better” phase of the recovery from COVID-19, particularly in High Streets and town centres. AREF will work to ensure that the property investment industry plays its full part in developing a built environment that works for all its users.
Governance: AREF is a leader in fund governance and transparency through its Code of Practice (Code). We are working on refining the Code and making it more principles and outcome-based rather than rules-based.
The main growth point in ESG is currently the “S”. With the other two areas being relatively well-defined and measured, the industry is now trying to quantify and measure the “S”, usually under the label of “impact investing”. This is complicated by the fact that property has multiple impacts (economic, social and environmental) which cannot be captured in a single measure. AREF’s most valuable contribution is to start on the process of taxonomy: “How do you define and measure impact in its different dimensions?”.
For further information on our priorities, please contact Paul Richards on firstname.lastname@example.org.