The H1 2013 edition of Preqin Investor Outlook: Real Estate shows that a significant trend in the private real estate market in recent years has been increasing investor interest in alternative routes to the real estate market. The proportion of investors with an interest in separate accounts, joint ventures or co-investment opportunities all increased during 2012.
Thirty-seven percent of real estate investors are now interested in co-investments, 39% in joint ventures and 35% in separate accounts, up from 35%, 37% and 33% since January 2012 respectively. Increased appetite for these types of investment is a result of institutions seeking the skill, resources, and unique opportunities that many real estate firms can offer, but with the additional control over their portfolios that would not be available through blind-pool fund commitments. However, the resources and knowledge required to make these investments means that it is typically the larger real estate investors that will look to gain exposure through these routes. Seventy percent of institutions with $10bn or more in total assets invest or consider investing via joint ventures, and 64% utilize or consider utilizing separate accounts. In contrast, among investors with less than $1bn in assets under management, just 19% invest or consider investing in joint ventures and 18% invest or consider investing via separate accounts.
The use of separate accounts by real estate investors is more widespread in North America than Europe, with 26% of investors headquartered in North America actively investing in separate accounts, compared with 11% in Europe. A further 14% of Europe-based investors, however, have not made a separate account investment but would consider doing so in the future.
Appetite for separate accounts also varies by investor type. Public pension funds frequently have large ticket sizes, making separate account investments a particularly viable option for many of these investors. Additionally, the majority (55%) of asset managers invest in separate accounts, or would consider doing so. Many asset managers are likely to have significant investment teams and the necessary resources to evaluate and monitor separate account investments.