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An investigation of US-Based Investors in Core Real Estate Funds

by Farhaz Miah

  • 23 Mar 2011
  • PE
  • RE

US-based investors in core real estate funds constitute a significant proportion of the private real estate investor universe. The largest real estate investors, those with total assets of $10 billion or more, comprise almost a quarter of US-based investors in core real estate funds. This includes the $80 billion public pension fund New York State Teachers’ Retirement System and the $30 billion asset manager Angeles Investment Advisors. Investors with $1-9.9 billion in total assets make up 35%, such as the $8.5 billion private pension fund Shell Retirement Fund (US) and $6.6 billion endowment plan University of Michigan Endowment. Investors with less than $1 billion in assets under management, for example the $900 million University of Illinois Foundation, collectively account for 40% of US-based core fund investors.

More than half of US-based investors in core funds have an allocation to such funds of less than $50 million, including investors such as Rotary Foundation and YMCA Retirement Fund which have an allocation of $20 million each to core funds. 12% of such investors allocate $250 million or more to core funds, such as the $70.3 billion public pension fund New Jersey State Investment Council which has an allocation of $352 million to core funds.

The smallest group of all investors, those with total assets of less than $250 million, are least likely to invest in core real estate funds, with 51% investing and 6% considering investment. In contrast, the largest group of investors, those with $10 billion or more in total assets, are most likely to invest in core funds, with 80% making investments in this type of fund. This includes the $114.7 billion insurance company Genworth Financial.

The majority of US-based investors in core funds will also commit to funds with different strategies. 84% also commit to higher risk/return profile private equity real estate funds such as the $7 billion public pension fund Montana Board of Investments. 2% would consider doing so, while 14% do not invest in this type of fund. 43% of US-based core investors also allocate to listed real estate, with 56% not investing. Only 29% of US-based core investors make direct real estate investments, with 71% choosing not to invest directly.

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