Barings quitting business of managing real estate stock funds in strategy overhaul

Washington

BARINGS is exiting the business of managing mutual funds that invest in real estate stocks as it retools its strategy in the sector.

The Charlotte, North Carolina-based firm runs the US$1 billion Invesco Oppenheimer Real Estate Fund and the US$53 million Dunham Real Estate Stock Fund on behalf of outside companies. Barings told Dunham & Associates last week that it will stop sub-advising the Dunham fund as of Jan 1, according to a Nov 7 filing with the US Securities and Exchange Commission.

Investor demand for assets outside of public markets is growing, according to data provider Preqin. Such assets are yielding higher returns than publicly traded securities for investors and higher fees for money managers, said Paul Gulberg, an industry analyst at Bloomberg Intelligence.

"You very clearly see a rotation to private assets in general," Mr Gulberg said in a telephone interview. "The new approach from the investor perspective is to get alpha on the private side." Barings is jettisoning its sub-advising arrangement at a time when the two funds are but a small part of its assets. The firm had US$43.6 billion in real estate as of June 30, most of it outside of public markets, according to its website. Barings, which is owned by Massachusetts Mutual Life Insurance Co, managed more than US$335 billion as of Sept 30.

"We are exiting the actively managed REIT equity business in order to focus and grow our core real estate strategies," Rachel White, a Barings spokeswoman, said on Friday in an emailed statement. Barings "remains active in private real estate equity along with public and private real estate debt".

Both mutual funds have posted gains of more than 24 per cent in 2019, outperforming the majority of their peers, as REIT stocks have rallied. The Bloomberg US REITs Index is up 20 per cent, on pace for its best year since 2014.

MassMutual owned the OppenheimerFunds until May, when it completed their sale to Invesco Ltd. BLOOMBERG