Northeast US-Based Investors in Private Real Estate – December 2014

by Justin Hall

  • 23 Dec 2014
  • RE

Preqin’s Real Estate Online service currently tracks 666 institutional investors located in the Northeast US targeting private real estate funds. These investors have aggregate assets under management (AUM) of more than $11tn and, on average, currently allocate 6.5% of total assets to the real estate asset class, below their average target allocation of 7%. As a region, investors in the Northeastern US remain under-allocated to private real estate funds, and will look to commit a significant amount of capital to the asset class in 2015.

Foundations represent 22% of the institutions located in this region.  Private sector pension funds and endowment plans each account for 20% of these investors, while public pension funds make up 17%. Insurance companies make up 5% of these institutions, while wealth and asset managers make up 4% and 2% respectively. The remaining 10% of LPs are made up of family offices, real estate fund of funds managers, investment companies and other firms. As an example, New York State Teachers' Retirement System (NYSTRS), a $105bn public pension fund based in New York, will look to commit between $250mn and $500mn to real estate in the next 12 months. NYSTRS will target funds utilizing opportunistic and value added strategies.

Similar to NYSTRS, investors located in the Northeastern US target a range of strategies when investing in private real estate funds. Fifty-eight percent of LPs target value added strategies, while 53% will look to invest in opportunistic funds. Core real estate funds are targeted by 43% of investors, while debt funds are considered by 35%. This suggests that investors in this region consider both high and low risk strategies when investing in real estate, but have a preference for committing to higher-risk strategies, in search of higher returns.

In conclusion, Northeast US-based investors will continue to commit capital to private real estate funds to fulfil their target allocations. This region is home to a variety of investor types targeting funds which utilize a multitude of strategies. Hartford Healthcare Pension and Endowment Fund for example, a $2.7bn endowment located in Connecticut, will make new commitments to private real estate in the next year; however, the endowment will invest in an opportunistic fund targeting global property assets.

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