ING Global's Ferguson: Real estate represents 'the buy of the century'

With the real estate investment trust market beginning to stabilize, the time to act is now. An upturn is coming in the publicly traded real estate space, and investors need to be nimble to take advantage of it, according to Ritson Ferguson, manager of the $1.9 billion ING Global Real Estate Fund (IGLAX). “The market is still soft, but right now, real estate is the buy of the century,” he said. “The fundamentals are beginning to stabilize.” Mr. Ferguson has been a part of the fund's management team at ING Clarion Real Estate Securities since the fund was launched in 2001. He thinks that a lot of the negative reports about the state of real estate are more indicative of the plight of private-investment funds that are holding overleveraged and underoccupied properties. “I live in the world of public markets, which is a little different than private equity,” Mr. Ferguson said. “The private market is looking in the rearview mirror, and everything is based on appraisals and sales.” From his perspective, which concentrates on publicly traded REITs and real-estate-related companies, the “forward-looking listed markets” are rich with opportunities.
“The listed market doesn't always get it right, and it tends to overdo it in both directions,” Mr. Ferguson said. “But the listed market anticipates trends, and the private market tends to follow by about 12 to 24 months.” Mr. Ferguson's fund has a 43% weighting in the Asia-Pacific region, followed by a 37% weighting in the Americas and a 20% weighting in Europe. The United States represents the largest single-country weighting at 34%. “The real estate recovery and upswing has already begun in places like China, Hong Kong and Australia, and the upswing will be later for the U.S. and parts of Europe,” Mr. Ferguson said. “I think things are still tough out there, but getting better, and the time to get involved is when the tide and perception is turning.” A few of the REITs that Mr. Ferguson likes are mall owner Simon Property Group Inc. (SPG) and Vornado Realty Trust (VNO), an office and retail-space owner. The fund, which averages about 90 positions, has seen some wild swings through the recent market turmoil. Last year, it gained 38%, while the S&P 500 was up 25%. In 2008, the fund declined by 45%, which compares with a 38% drop by the index. For more PORTFOLIO MANAGER PERSPECTIVES go to InvestmentNews.com/pmperspectives.