Contact: Ian Howell, (01962) 847540; email: [email protected]

1 Summary

1.1 Goodman Property Investors manage the Fund's portfolio of European indirect property funds. Aberdeen Asset Management PLC announced on 6 May 2008 that it had acquired Goodman Property Investors from the Goodman Group.

1.2 This report considers the possible implications for the Fund.

2 Recommendation

That the report be noted.

3 Goodman Property Investors

3.1 The Panel appointed Arlington Property Investors to manage a portfolio of £56m invested in European indirect property funds, with effect from 1 January 2007. At that stage, Arlington were a subsidiary of the Australian property and financial services group Macquarie Goodman. They rebranded themselves as Goodman Property Investors in July 2007, as part of a group now known as Goodman International Ltd.

3.2 During 2007, Goodman Property Investors undertook a strategic review of their business and concluded that normal organic growth would not provide the capacity to meet clients' increasing demands for international property investments. They believed that a significant increase in their size was necessary to remain competitive, through acquisitions or joint ventures with other property firms. They then identified Aberdeen Property Investors as the best strategic fit. Discussions led to an offer by Aberdeen Asset Management to acquire Goodman from Goodman International Ltd. This offer has been accepted, subject to the approval of the Financial Services Authority. The combined group is said to be the second largest property fund manager in the UK. It will operate under the Aberdeen Property Investors brand.

3.3 The Goodman property business was originally developed by Aberdeen and was sold to Arlington in 2004, so it unsurprising that there are similarities in their investment philosophy. There is also a geographical fit with Goodman being stronger in the UK whilst Aberdeen have developed their presence in continental Europe and Asia. Aberdeen also acquired the German property group DEGI earlier this year.

4 Implications for Hampshire

4.1 At this early stage, Goodman have assured the County Treasurer that there will be no change to the management of the Hampshire portfolio with the existing staff remaining in place, including the team based in Amsterdam. The Panel's senior contact at Goodman, Andrew Smith, will continue to manage the indirect investment team and will be a member of the Management Board of the combined business.

4.2 The acquisition by Aberdeen will leave three of the Fund's 12 portfolios managed by Aberdeen. No other manager is responsible for more than one portfolio. The proportion of the Fund's strategic asset allocation in the hands of Aberdeen will increase marginally from 20% to 22%.

4.3 Placing too much of the Fund with one manager would increase the risks if something were to happen to that manager. This could range from financial failure, an adverse takeover, a loss of investment performance or focus as an investment house, or a loss of key personnel. At this stage, there is no suggestion of any concerns about Aberdeen Asset Management, which is listed on the London stock exchange.

4.4 Goodman have been impressive so far in their approach to investing the Fund's relatively small £56m portfolio of European indirect property funds. It is early days, however, and there is no clear picture of whether the portfolio will perform successfully in the longer term. The impact of the Aberdeen purchase will need to be monitored closely over the forthcoming months in case the focus of the investment staff is diverted from managing the portfolio to any restructuring or rationalisation of the business that might be undertaken by Aberdeen.

4.5 On the positive side, there may be some advantages for the Fund from the new Group's wider capabilities if it is able to bring forward suitable opportunities for the Panel's consideration for property investments in other global markets, such as Asia.

4.6 Representatives from Goodman are due to report to the Panel at the meeting on 21 November 2008. The County Treasurer will meet both Aberdeen and Goodman during the summer and will report to the Panel if any action is necessary.

Section 100D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB: The list excludes:

None.

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