Leading Aviva Investors’ 11-strong Global Listed Real Estate team of property, equity and research analysts in London is a lot less bruising, but the former play-maker draws heavily on the lessons learned from his sporting past.
He says: “Watching the best sporting teams in the world and how they function can be hugely inspirational but also very informative. The All Blacks have a philosophy called ‘sweep the sheds’. The captain and the vice-captain are the first to get off the bus and carry bags and stay back after the game to clean the changing rooms. It is all about a servant mentality – serving each other and staying humble. So here we have got a tight-knit team. We support and challenge each other and recognise that we never stop learning.”
He says you have to love what you do too. “Whenever as a boy I talked with my Dad about a match I had played in, despite the score-line he would ask: ‘Did you enjoy yourself?’ He taught me how important it is to be passionate about what you do. For me, that also means being passionate about the people we’re investing in, the people we invest with and, most importantly, the people we invest for.”
His keen focus on performance is perhaps not surprising, but here de Bruin sees important differences between the worlds of sports and investment management. “There is a saying in rugby: ‘Success is written in ice and tomorrow the sun will shine again.’ With investments, your track record stays with you for a long time. The scoreboard is there for all to see. Our investors do not care if we win the award for the highest alpha this year. That’s like scoring a try. They are looking for long-term performance over five to ten years.”
De Bruin and his team – five investment analysts and five research analysts – support the wider Aviva group, managing GBP 2.4 billion of listed property assets, often as components within multi-asset portfolios. Within the AIMS Target Income Fund, one of Aviva Investors’ flagship products, their REIT strategy encapsulates the team’s approach. Since inception in February 2015, it has delivered 9.43% against the FTSE EPRA NAREIT Global REITs benchmark of 5.75% and 4.96% income yield against the benchmark of 4.12%. But de Bruin says: “For us, it is about more than just beating the benchmark. It is about delivering the outcomes our clients need. And for that, we have to understand our clients very well.”
Though designed with a broad range of clients in mind, the high-conviction strategy is particularly suited for older investors.
“While most fund managers focus on volatility, sequence-of-returns risk is a key concern for investors in retirement; it might leave them drawing down capital in a downturn and not having enough shares left to benefit from the recovery. The outcome they are looking for is sustainable income throughout their retirement,” says de Bruin.
“Listed property is a fantastic asset class for that because it delivers the income and the natural income growth and allows you to leave your capital in place to grow over the long term. Capital growth is ultimately a function of income growth over longer-term holding periods.”
In the circumstances it is perhaps not surprising that the Aviva team members are particularly focused on income, though they also keep a careful eye on other sources of total return within the strategy – net asset value (NAV) growth, changes in the premium or discount to NAV and the relationship between those two variables.
De Bruin says: “We can have a high degree of certainty in the dividend returns and some level of insight into NAV growth – thanks to analyst coverage, management guidance and understanding of property market fundamentals. We are less certain about premiums and discounts – sell-side analysts will typically put target prices out one year in advance, but if you are investing for income and growth your horizon is three years at least. So you cannot fixate on premiums. You can be opportunistic, but you have to concentrate on the long-term drivers of return, which will be yield and NAV growth. It is about balancing productivity value with relative value.”
For de Bruin, that means blending a focused but well-diversified portfolio of high-yielding, value-oriented names with low-yielding, high-growth cyclical stories. He admits that in most respects his team’s view of the current market is in line with consensus, but he does see some market anomalies offering the potential for a sweet spot of strong yields and growth.
He says: “One area where we are probably less aligned to the market is around the e-commerce trade. We think the market is rightfully pricing in a large divergence between industrials and retail but is guilty of painting the entire retail sector with the same brush, which creates an opportunity for a discerning active manager.”
“Newly formed Unibail-Rodamco-Westfield has put out some robust earnings growth numbers recently, yet the yields are north of 6%. On the other hand, SEGRO – another great company – is yielding close to 2.5%. To compete on total returns, the industrial powerhouse has to deliver close to double-digit NAV growth over the next five to ten years. That might well happen, but the way we think about the probability of the outcome is different.”
De Bruin admits his call might be wrong in the immediate future, but – returning to his sporting analogies – reminds us that his is a team focused on the long game.
