ING Direct 2008 Annual Report Download - page 47

ING Group Annual Report 2008
45
ING REAL ESTATE
2008 was a difficult year for ING Real Estate as the financial crisis
continued to impact negatively on real estate markets around the
globe. As a result, some of world’s most established real estate
markets saw substantial falls in value as the readily available capital
which had fuelled the strong valuation growth of previous years,
dried up. Canada, Australia and the United Kingdom in particular
saw substantial yield shift and valuation declines with Asia and
Europe also being affected negatively during the year. In the second
half of the year the prospect of recession in many major economies
proved a further blow to the markets.
At the year-end, ING Real Estate’s total business portfolio was
EUR 106 billion, marginally lower than 2007. A 15% increase to
EUR 37 billion in the loan portfolio was offset by a decrease in
assets under management from EUR 75 billion to EUR 70 billion.
Despite an inflow of new client money, the decrease in assets
under management occurred as a result of lower values in listed
and unlisted funds as well as adverse currency movements.
As the real estate markets went into reversal, ING Real Estate put
in place a cost containment programme, beginning at the end of
the first quarter of 2008. This resulted in full-year costs excluding
impairments being only marginally (less than 1%) higher than 2007.
ING Real Estate Investment Management
Fee income was much lower and there were substantial unrealised
losses on the investment portfolio. Despite this there were
significant net inflows into funds and a number of new mandates
were won. During the year the focus of Real Estate Investment
Management remained on ensuring client relationship
management was maintained to the highest standard whilst
at the same time ensuring a switch from growing the business
to sustaining the performance of the business. Cost containment
measures were implemented to ensure the cost base reflected
the new reality of the market.
ING Real Estate Finance
The Real Estate Finance business held up well, given the market
circumstances. The loan portfolio grew by 15%, and although risk
costs increased quite substantially, volumes and margins rose as
well. The loan portfolio remained diversified both by geography,
of which 53% was Dutch, and by asset class. Following the
substantial growth in recent years it became clear towards the
end of 2008 that Real Estate Finance would be unable to sustain
its current growth particularly in the light of ING Group’s overall
risk strategy.
ING Real Estate Development
At Real Estate Development it became apparent that to withstand
the deteriorating markets it would need to continue to review its
business and refocus its activities on major retail and regeneration
projects. As a result the business withdrew from a number of
projects while also deferring several projects that were in the
pipeline. It continued to progress major regeneration and inner
city projects across Europe, projects which were already under way
and which had already passed the stringent risk criteria in place for
development activities.
Asia/Pacific
Assets under management fell 25% to EUR 63.6 billion. Third-
party AuM fell by 19% to EUR 48.4 billion and proprietary business
AuM declined by 39% to EUR 15.2 billion. Equity funds in the
region experienced outflows, but bond funds received net inflows.
Despite the uncertain economic climate, ING was successful in
booking significant new and prestigious mandates with the
Monetary Authority of Singapore (EUR 183 million), the Bank
of Thailand (EUR 143 million), Bank Negara in Malaysia (EUR 129
million) and GSIS in the Philippines (EUR 215 million).
On the retail front, major fund launches included a Real Estate
Fund in Hong Kong and the Taiwan Focus Fund, which will be
marketed around the region. The launch of the High Yield
Currency Fund in Japan resulted in record net inflows (EUR 3.58
billion). ING IM expanded its geographic footprint by opening a
representative office in Beijing.
Risk management was a major focus in the business. Risk controls
were strengthened and a more frequent risk reporting process was
conducted to consolidate risk issues for management. In 2009,
there are plans to further strengthen risk awareness and regional
investment risk governance.
Goals and ambitions
ING Investment Management gives ING a significant global
presence through its broad offerings of a diversified mix of
products with solid performance.
ING IM is committed to further strengthening partnerships with
ING businesses and developing third-party business opportunities.
The business also strives to increase investment performance for
clients and to maximise the use of ING’s risk management skills.
Both the retail and institutional sides of the businesses will
continue to focus on close customer contact and are committed
to working with clients to manage their investments through
turbulent times.
With the likelihood of difficult market conditions continuing in
2009, cost containment measures have been taken with due care
to preserving the investment expertise and full commercial growth
capabilities of the business.
ING IM will focus further on strengthening the organisation to
capitalise fully on the recovery after the crisis. This includes enhancing
operations, investment platforms and distribution capacity.