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$1bn Plus Investors in Real Estate – January 2014 (Part II)

by Olivia Harmsworth

  • 03 Jan 2014
  • RE

Investment consultants can be a useful tool to investors, providing advice on the array of opportunities in the alternative assets market, portfolio construction and manager selection. However, use of investment consultants again varies among investors, with larger allocators to the asset class more likely to have an in-house team capable of undertaking all the necessary due diligence on external managers and direct investments. Preqin data shows that 37% of $1bn plus investors make decisions concerning their investments in-house, as opposed to utilizing the services of an investment consultant. Many $1bn plus investors that do employ an investment consultant will also be very active in the direction of the capital invested from their real estate portfolios, with these investors very unlikely to completely outsource the decision making process. 

Using Preqin’s Fund Searches and Mandates tool on Real Estate Online, it is possible to see that $1bn plus investors are most likely to be targeting value added funds in the next 12 months, with 68% targeting the strategy, while 64% are targeting core funds in the year ahead and 54% are interested in opportunistic funds. Larger investors are more likely to utilize a diversified investment strategy, investing across a range of real estate strategies along the full risk spectrum. However, only 14% of $1bn plus investors are targeting debt funds and 11% include distressed vehicles within their investment mandate for the coming year.

Overall, the significant disparities between investors allocating $1bn or more to real estate and smaller investors demonstrate the depth of resources and the diversified real estate exposure targeted by the largest institutions. Investors allocating $1bn or more to real estate represent a considerable 84% of total capital allocated to the asset class, and are often considerably more proactive when choosing investment managers Therefore, it is important for fund managers to ensure that they are using all avenues available to them in order to get their funds in front of the key decision makers at these institutions. 

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