While big pension funds have infrastructure in place that allows them to invest in private real estate directly, small- and medium-sized pension funds have a much harder time accessing this asset class. Jason Roque, chief executive officer and founder of Equiton, is on a mission to make it easier for plans of all sizes to benefit from the potential risk-adjusted return, diversification and capital preservation benefits of private real estate.
▶ Why is it important to you to expand investors’ access to private real estate?
Canadian defined benefit plans generally fare well from a solvency ratio perspective, but they’re becoming increasingly aware of macro risk introduced through global political turmoil, the looming fear of recession, inflation reaching levels not seen in decades and a general uptick in market volatility. Private real estate can be a viable tool to help combat these negative market forces. It can deliver higher risk-adjusted returns with measurably lower volatility than most traditional asset classes. It offers downside protection—for example, MSCI’s Private Canadian Multi-Residential Index recorded positive returns throughout the financial crisis in 2008, COVID crash in 2020 and inflation-driven crash of 2022. It also diversifies portfolios more effectively than public real estate investment trusts, which are highly correlated to the market. Furthermore, private real estate is an effective inflation hedge, which is very relevant in today’s environment. And it can generate a growing and predictable income stream, plus capital appreciation that’s disconnected from typical external forces that affect traditional markets.
▶ Equiton’s AUM more than tripled from December 2019 to December 2021 and is still growing. What’s driving that growth?
Both institutional and retail investors are becoming more sophisticated and that’s increasing demand for alternative assets like private real estate. In particular, investors have observed the resilience, stability and risk-offsetting properties of multi-residential real estate. Meanwhile, throughout the pandemic—a period of great uncertainty— Equiton remained disciplined and focused on our core business. We also remained active, acquiring multiple properties in 2020 and 2021. The investment community recognized this and has now entrusted us with close to $1 billion in AUM.
Private real estate can be a viable tool to help combat these negative market forces. It can deliver higher risk-adjusted returns with measurably lower volatility than most traditional asset classes.
▶ How is ESG embedded into Equiton’s corporate culture and investment decisions?
ESG is part of our corporate philosophy; and our approach to responsible investing is built on the principles of risk management and value creation. We’ve always made it a priority to integrate relevant and material sustainability considerations into our decision-making process throughout an asset’s life cycle. Over the last couple of years, we’ve formalized our approach to ESG integration, including engaging an external ESG consultant to help us develop a three-year ESG roadmap. We became a Principles for Responsible Investment (PRI) signatory in 2020 and we’re pursuing other industry certifications, too. For us, ESG is a journey, not a destination.
▶ What is your vision for Equiton in the institutional investing space?
Our mission is to be a premier asset provider, making private real estate accessible to the small- and medium-sized segments of the Canadian institutional marketplace. We feel those pension funds are underserviced. We want to fix that by being a partner from the alternative space that makes it easy to invest in high-quality private real estate. We’re entrepreneurial and nimble, so we can react quickly to capitalize on opportunities and focus on what we understand and do best. For us, that means we’re broad, deep and specialized in real estate, with a team that has decades of experience in the essential areas of acquisitions, development and property management.