Asset Managers Investing in Real Estate – November 2012 (Part 1)

by Farhaz Miah

  • 28 Nov 2012
  • RE

Asset managers constitute a significant investor segment in real estate. These financial intermediaries play an integral role in managing the direction and flow of investment capital to the asset class. Collectively, the 145 asset managers listed on Preqin's Real Estate Online that are active in the real estate space have $4.3tn in assets under management, with a collective real estate allocation of $285bn.

Of the 145 asset managers investing in real estate, 28% have property investments totalling less than $99mn. Around 7% of asset managers have investments between $100mn and $249mn in real estate, and an equal 7% have investments between $250mn and $499mn in the asset class. About 9% of asset managers have aggregate real estate investments in the region of $500-999mn. A substantial 27% of asset managers have real estate investments between $1bn and $4.9bn, demonstrating the importance of real estate as an investment class to this investor sub-segment. Around a fifth of asset managers active in the real estate space have investments equating to, or exceeding, $5bn.

Over 70% of asset managers that allocate to real estate actively invest or consider private real estate funds.  Core real estate funds are the most favoured fund type of such asset managers, with 65% exhibiting a preference for this fund strategy. This is closely followed by opportunistic vehicles, which are targeted by 63% of asset managers. Over half of asset managers (53%) demonstrate a preference for value added strategies. A sizeable 42% of asset managers have a preference for core-plus vehicles. Debt and distressed strategies are favoured by 33% and 29% of asset managers respectively. Only 7% consider funds focused on the secondaries market, while only 4% consider the fund of funds route.  

Asset managers are a crucial source of capital for real estate fund managers. Fund managers that are able to respond effectively and align fund strategies to the investment criteria that guide asset managers will be more effective in raising institutional capital from this segment of the real estate investor universe. In part two of this blog post, find out more about the comparative actual allocation of asset managers benchmarked against the wider LP universe, other investment routes in real estate considered by asset managers and asset managers’ appetite for first-time funds.

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