Torres |
Michael C. Torres, Adelante U.S. Real Estate Securities Fund
[May/June 2007]
By Jada A. Graves
Michael A. Torres' career in financial services sets him apart from many other real estate fund managers. For example, in 1991 the CEO of Adelante Capital Management LLC and portfolio manager for Adelante U.S. Real Estate Securities Fund was a key player in establishing what is now the Dow Jones Wilshire Real Estate Index.
At the time, Torres worked as director of real estate research with Wilshire Associates, and vividly recalls the pre-Internet research involved in creating the performance benchmark. "I did a lot of the legwork, going to the stacks of UCLA's library, looking through finance books for real estate companies that were public and the ones that were no longer public," he says.
Partially due to Torres' effort, the Wilshire Real Estate Securities Indexes [now part of the Dow Jones Index Services] are an integral part of tracking the real estate industry, and one of his proudest career achievements. "At Wilshire, our motivation was to help institutional investors gain a better appreciation of the industry for asset allocation purposes, but then that work evolved into becoming an investment benchmark," he says.
Torres' career started at Prudential Financial in 1986 after he earned both a degree in architecture and an MBA in real estate finance from the University of California, Berkeley. In 1990 Torres left Prudential Financial for Wilshire Associates, where he stayed for five years before joining Adelante Capital Management, LLC, which was then known as Lend Lease Rosen Real Estate Securities LLC.
Another distinction from other portfolio managers is Torres' role as CEO of Adelante Capital Management. He describes himself as having five jobs. "I have responsibilities that go beyond those of most portfolio managers because Adelante U.S. Real Estate Securities Fund is only one piece of an overall enterprise. I worry not only about the investment environment but also about the regulatory environment. I'm concerned with the stakeholders in the firm and with how we fit into the community. Community giving and participation are an important part of Adelante Capital Management."
Torres is an active member of various community organizations. He specifically highlights his membership with the New America Alliance, a professional organization for American Latino business leaders interested in philanthropic service to their respective communities. "Serving as a role model for young people and enriching our communities through service goes beyond the role of portfolio manager and CEO, and yet, it's also very much part of the job," he says.
| Adelante U.S. Real Estate Securities Fund
A focused investment strategy is one of Adelante U.S. Real Estate Securities Fund's most distinctive traits—it invests only in the securities of apartment, industrial, office and retail companies. "We created this fund as an opportunity to diversify stocks and bonds," Torres says. "But we also found that we could do that and outperform without exposure to all the property types."
Within those four sectors the fund has 40 holdings. Ninety-five percent of them were REITs as of Dec. 31, 2006. When selecting stocks within those property sectors, four criteria are considered: overall investment strategy, strength of a company's management, fundamental analysis of financial statements and yields. "We have an NAV approach," Torres explains. "We go through a quantitative ranking of the universe to start the systematic process, then we will incorporate our own proprietary evaluation to define the weighting in the portfolio."
With this strategy, Adelante U.S. Real Estate Securities Fund consistently has performed better than half the real estate investment universe ranked by Lipper. Torres says the fund's Y class shares were in the thirteenth percentile for year-to-date total return at the end of February, or number 36 out of 286. "The fund generally performs better than half the investment universe, which is what I expect it to do. That and less volatility remain our goal."
|
| Top Five Companies: |
| Company |
% of Portfolio |
| Vornado Realty Trust |
7.7% |
| Simon Property Group, Inc. |
8.2% |
| General Growth Properties |
7.8% |
| Equity Residential |
6.8% |
| Boston Properties |
6.0% |
| Sector Holdings: |
| Sector |
% of Portfolio |
| Office |
29.4% |
| Retail |
25.3% |
| Apartments |
23.8% |
| Diversified |
14.1% |
| Industrial |
5.0% |
| *All other sector holdings are in cash.
*Fund’s diversified holdings are with companies that invest in office and industrial properties.
*All data as of March 31, 2007 unless otherwise noted |
Torres has also contributed to the industry. He served on NAREIT's Investor Advisory Council for two years and on the Board of Directors of Equity Lifestyle Properties, Inc. (NYSE: ELS) for 10 years.
Torres also was a board member with the Corporate Governance Center at the School of Business at Kennesaw State College. His board background gives him a perspective on effective corporate governance.
"In many instances, companies have the same board members from when they became public," Torres says. "However, the REIT industry continues to evolve, and it's reasonable to expect attrition in the boardroom. It makes sense to me for companies to continually re-evaluate their boardroom and be guided by people with different experiences."
Though his role as CEO allows him to serve the industry, Torres says he's still excited by real estate and fund managing. "It's a privilege to manage other people's money. You need to address it with passion and competitiveness, and not take it lightly," he says. "In some ways, working in real estate is the same as when I worked at Wilshire and created the index. You have to know the management teams and the corporate structures. You have to listen to the markets and understand the global market. That's what defines success."
|
