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Interview with Austin Mitchell, Nuveen

How do you view the current climate for fees and the ranges that you are seeing?

The real estate industry is immature in terms of market share concentration, so where you have more supply and more choice you would expect downward fee pressure on fees. There is some evidence of that. But it is polarised between those with an established track record and product, and those doing things for the first time. There are some pockets of downward fee pressure but this is more prevalent in parts of the industry where there are options and choice for investors, and fees represent a greater proportion of forecast performance. Investors are happy to pay for performance, especially with operationally intensive and alternative real estate sectors, where there is material demand.

Due diligence must be challenging in the current climate. How is this affecting the industry’s willingness to invest?

Allocations to real estate are rising every year, but the levels of deployment have left a gap. The issue now is about pivoting strategies towards areas where you have the highest level of conviction. In real estate, traditionally the highest allocations were to retail and office, but that is where the most questions are right now. We have strong conviction around strategies in more ‘alternative’ sectors as well as housing, logistics and debt.

How is the funds sector responding to or likely to respond to the Covid crisis?

More ‘alternatives’, more operational real estate, more impact investing and more consolidation. Plus the transition of rental housing to a branded consumer product.

What priorities are investors seeking from fund managers right now?

There is investor demand for a positive social and environmental impact. We’ve seen a huge sea change with investors changing the way they make decisions. One of the biggest areas is the affordability challenge in cities. Where strategies specifically targeting social mobility and accessibility objectives can help with housing for people with certain income thresholds and ensuring access for people with certain roles, including key workers. We are spending an increasing amount of time developing additional impact investment strategies for our clients, and have been an active impact investor for over a decade.

Austin Mitchell

Austin Mitchell, Head of International Housing and Global Strategy at Nuveen