Preqin’s Real Estate Online currently tracks 798 LPs in the US that are investing in core real estate funds. Of these investors, 42% are found in six different states. California-based LPs make up 10% of active investors in core real estate, with New York accounting for 8%. Illinois, Massachusetts, Florida and Texas each account for 6% of US-based investors in core real estate funds. Investors in these six states have aggregate assets under management of more than $5tn, and on average, currently allocate 8% to real estate, below their average target allocation of 9%. This is particularly positive for fund managers as more capital is likely to flow into private real estate as investors look to move towards their target allocations.
With a large number of investors in core real estate in these six states, public pension funds account for 43% of investors, with private sector pension funds making up 26%. Foundations represent 12% of investors in these states, followed by endowments at 10%. Insurance companies account for 3% of LPs as the remaining 6% of investors in core real estate are made up of asset managers, investment companies and trusts, real estate firms, and wealth managers.
Los Angeles City Employees’ Retirement System (LACERS), the $13bn California-based public pension fund, is an example of a large core real estate investor. The public pension fund plans to commit up to $60mn to core real estate funds for the remainder of 2014. These new investments will be part of its plan to invest $230mn over the next few years, with $140mn to core real estate funds. Similarly, Hamilton College Endowment, an $800mn New York-based endowment plan, will look to fill its target allocation by committing up to $12mn to core real estate funds as well.
In terms of geography, 97% of LPs in these six states with the largest amount of investors are investing in North America-focused core funds. European markets are targeted by 37% of core real estate investors, with 32% of investors focusing on real estate assets in Asia.
In conclusion, as investors in core real estate attempt to fill their target allocations, many will commit more capital to the real estate asset class. Recently, Indiana Public Retirement System, one of the most active investors in core real estate, has made a commitment of $75mn to Stockbridge Smart Markets Fund, a US-focused core property fund.