The argument for international diversification

Mark Preston, Group Chief Executive, explains how international diversification provides Grosvenor with long term security and opportunity for growth.

16th September 2015

For many years Grosvenor has been an internationally diversified property group with operating companies and investments across the world. Grosvenor first expanded internationally in the 1950s - into North America - and Grosvenor has now come a long way from its roots in the heart of Mayfair and Belgravia.  Last year we celebrated our 20th anniversary of being in Asia.

Given the current buoyancy of the UK property market, why do we attach such importance to pursuing further diversification?

Everything that we do seeks both to secure Grosvenor’s growth and its security for the long-term. International diversification provides us with that security and opportunity for growth.

It is well known that property markets operate in cycles, and the experience of the 2008 crash showed just how severe the peaks and troughs can be. 

However, the world’s property markets remain significantly uncorrelated: when one market is up another may be down. This is particularly true when currency movements are considered. Being present in a variety of markets smooths the overall volatility of our financial performance - essentially making us more resilient.

Although the 2008 crash was globally synchronised to an unusual degree, nevertheless Grosvenor’s returns in 2008  were -4.1%, compared with undiversified UK market returns of around -22%.

Political risks are a further influential factor, with property values across the world being affected by political change and reform. Other risks that could affect our business include natural disasters: by avoiding reliance on a single market, we reduce our vulnerability to an isolated disaster.

Opportunities for growth arise as a consequence of exposure to a greater range of sectors and geographies.  The activities of our Indirect Investment team range from Australia to the US, while our three regional OpCos and GFM are active in more than 60 cities in North America, Asia and Europe – all demonstrating how we are taking advantage of this.
Furthermore, the benefits of shared knowledge, insight and expertise across borders help to produce an enhanced skill-set from a diverse international staff and our international footprint gives us access to new and varied banking and investor relationships.

Finally, the shareholders remain significantly invested in property and therefore rank alongside other large private investment groups as rather undiversified by comparison. While Wheatsheaf Investments is helping to address this, it is nevertheless important that within Grosvenor we diversify what is a highly concentrated investment in a single property group from the shareholders’ perspective.

As a private company, Grosvenor’s position in the market has been reached by taking the long view with this diversified portfolio.  We have diversified into international markets to achieve longstanding resilience and sustainable growth and we intend to continue expanding our international footprint well into the future.

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