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North America-Based Investors in Global Private Real Estate Funds – October 2014

by Justin Hall

  • 24 Oct 2014
  • RE

Preqin’s Real Estate Online currently tracks 903 investors located in North America that target global private real estate funds. These firms have aggregate assets under management of more than $16tn and on average, currently allocate 7% to real estate, below the average target allocation of 8%. This suggests that these investors could be looking to increase their allocation to real estate with the goal of fulfilling their respective target allocations.

Foundations represent the highest proportion (24%) of North America-based investors that invest in global private real estate funds. This is followed by private and public pension funds, representing 19% and 18% of investors respectively. Endowment plans (18%), family offices (5%), wealth managers (4%) and insurance companies (4%) also make up a significant proportion of these institutions.

The majority of these investors (53%) have assets under management of less than $10bn, while the remainder manage assets of more than $10bn. These investors of all types and sizes are likely to consider investing in regions outside of North America for geographic portfolio diversification benefits and increased risk-adjusted returns.

In terms of which regions these investors favour, 72% percent of North America-based LPs will consider investments in European-focused private real estate funds, while 53% will look to invest in Asian funds.  A much smaller amount of investors consider investments in the Americas or Africa, at 13% and 2% respectively. 

Investors targeting private real estate funds globally will consider a range of fund types. These North America-based investors tend to favour higher-risk strategies when investing globally in private real estate funds. Eighty-three percent of these investors will pursue opportunistic funds and 76% will utilize value added strategies. When investing outside North America, investors are likely to pursue these strategies in search of higher returns. Teacher Retirement System of Texas, a $130bn public pension fund, is one of these investors looking to commit to global private real estate funds. The pension fund will commit $100mn to European private real estate funds in the next 12 months. 

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