Foundations Investing in Real Estate – July 2014

by Thomas Barker

  • 21 Jul 2014
  • RE

Preqin's Real Estate Online service currently tracks over 600 foundations investing in the real estate asset class. Foundations are among the smallest investors in terms of total assets, with approximately half allocating less than $5mn to real estate and a limited proportion (14%) allocating more than $100mn.

As is the case with a large proportion of institutional investors, foundations are generally allocated below target to real estate. Foundations have an average current allocation to the asset class of 6.4%, against a target allocation of 7.8%. Institutional investors as a whole allocate on average 9.3% to real estate, below a target of 10.3%. Foundations therefore target and allocate noticeably less of their capital to real estate than other limited partners.

Foundations typically maintain a preference for private real estate funds, with 81% investing in the asset class through these vehicles; many of these investors favour the expertise of a fund manager due to a lack of internal resources and limited expertise to invest in the asset class directly. Preqin research reveals an appetite for higher-risk strategies among this investor group, with a large proportion (47%) of foundations exposed to opportunistic and/or value added strategies. Core and core-plus strategies are favoured by 17% and 12% of foundations respectively, with debt pursued by 13% of foundations.

The majority (86%) of foundations on Real Estate Online are based in North America, with many of these investors displaying portfolio bias towards this region. Sixty-seven percent of foundations invest in private vehicles targeting North America, although exposure to Europe and Asia is notable at 32% and 18% respectively. 

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