Asset Managers Investing in Private Real Estate Funds – January 2014

by Jack Jackson

  • 22 Jan 2014
  • RE

Asset managers are important sources of capital for private real estate fund managers, with combined assets of $3.7tn managed by a total of 111 asset managers tracked by Preqin that are investing in private real estate funds. These firms currently have an aggregate allocation of $58.2bn to private real estate funds, showing that asset managers can pool their clients’ capital to make significant contributions to the real estate fundraising market. 

Asset managers exhibit a strong preference for core funds, with 79% of these institutions open to investing in this fund type. The next most attractive vehicles to asset managers are opportunistic and value added funds, with 61% and 57% of asset managers showing a preference for these strategies respectively. Fifty-one percent of asset managers exhibit a preference for core-plus funds, while debt and distressed vehicles are preferred by 42% and 33% of asset managers respectively. Unsurprisingly, due to the double layering of management fees, real estate fund of funds vehicles are not actively sought by asset managers, with only 5% exhibiting a preference for these funds.  

In terms of location preferences, Europe comes out on top, with 68% of asset managers preferring to invest in the region via private real estate funds. North America is the next most sought after location, with 59% of asset managers exhibiting a preference for the region. Forty-nine percent of these institutions find the Asia-Pacific region attractive for real estate investment, and 33% prefer their real estate fund investments to have a global reach. Ten percent of asset managers show a preference for South American private real estate, while just 4% exhibit a preference for Africa-focused vehicles, showing that asset managers, perhaps based on the preferences of their clients, are reluctant to enter emerging markets.

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