North America-Based Private Wealth vs. Institutional Real Estate Investors

by Matthew Bacco

  • 21 Mar 2016
  • RE

Preqin’s Real Estate Online contains detailed information on 2,752 North America-based real estate investors, comprised of 2,257 institutional investors and 495 private wealth firms. While these investors do share some similarities, Preqin data highlights differences in the route to market, risk exposure and regional preferences of these two investor types.

Private wealth firms allocate, on average, a larger proportion of their total assets to real estate vehicles (10.2 %) than institutional investors (6.1%). Private real estate funds are the primary route to market for both investor groups, with 88% of institutional and 58% of private wealth investors preferring these vehicles. However, a greater proportion of private wealth firms invest via listed funds and direct investments (40% and 38% respectively) compared with institutional investors (33% and 21% respectively).

As seen in the chart above, institutional investors have a greater preference for core, core-plus and debt vehicles, with 62%, 27% and 37% of institutional investors seeking exposure to these strategies respectively. The greatest variation in the strategy preferences of these two investor types is seen in their exposure to core strategies: just under two-thirds of institutional investors seek to invest in core real estate compared with only 38% of private wealth investors. With a greater focus on the generally lower risk core-related strategies, institutional investors look to favour the safer real estate strategies more than private wealth investors.

Unsurprisingly, both North America-based institutional and private wealth investors prefer to invest domestically; nearly every investor in these two groups targets North America-focused funds. However, institutional investors are more likely to make commitments elsewhere; almost a third of institutional investors have a preference for Asia-focused vehicles compared with only 12% of private wealth investors. Additionally, 38% of institutional investors have a preference for Europe-focused vehicles compared with only 17% of private wealth investors.

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