Italian real estate manager Sorgente has had its rating upgrading by Moody's, to MQ2 from MQ3 on the back of successful performance, customer retention and continued implementation of additional risk management and investment process controls.
During the past three years, Sorgente's assets under management have grown nearly 50%. The firm is one of the largest Italian real estate managers with €1.9bn of AuM.
Moody's noted that Sorgente remained focused on its strengths as an asset manager and this was reflected in the stability of the performance of its funds relative to the broader Italian real estate sector.
The maturity and liquidation of the firm's flagship Michelangelo Fund during 2010 highlights Sorgente's ability to manage the full lifecycle of its fund product. The firm also retained many flagship fund investors in the follow-on Michelangelo II Fund, which demonstrates investor conviction in the fund's investments and Sorgente's ability to identify opportunities amongst trophy real estate assets, said Moody's.
Michael Eberhardt, Moody's lead analyst for Sorgente, said: "Since our initial rating, Sorgente has reinforced investment infrastructure and risk management practices. Key man risk has been addressed by a broadening of the investment team while accountability throughout the investment lifecycle is more clearly defined with internal and external parties ensuring high service levels and independence."
However, the firm does face challenges shared by its fellow Italian real estate managers. The present uncertainty surrounding the reform of the Italian real estate fund sector may present difficulties for the industry in delivering performance to investors, although the local Italian real estate association is seeking to minimise the potential impact of such reform.
An additional challenge that Sorgente faces is more company-specific. While Sorgente has historically experienced very low levels of staff turnover, the firm currently does not have defined
retention measures, such as equity participation, which may increase turnover risk.
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