The top 10 private equity real estate firms based on capital raised for closed-end private equity real estate funds in the past 10 years have raised $163.3 billion from global investors in the last decade. The corresponding figure for the top 10 private equity firms is $425.7. Considering the smaller size of the private real estate industry, it seems that the top 10 managers have been enjoyed fundraising success over the past 10 years. Following the financial crisis however, these firms have experienced the same kinds of difficulties as managers across the market.
One quarter of global private equity real estate investors monitored on Preqin’s Real Estate Online database have made a commitment to at least one fund managed by one of the top 10 firms. 73% of known investors in funds managed by the top 10 firms are based in the US, with an additional 3% based elsewhere in North America. This is not surprising considering that US-based institutions account for 56% of all private real estate investors. The US is also home to some of the largest investors in the asset class, and nine of the top 10 firms are themselves headquartered in the country, while Brookfield Asset Management is headquartered in Canada.
Continental European institutions account for 13% of investors in funds managed by the top 10 firms, Asia-Pacific investors account for 6%, and 4% are situated in the UK. The top 10 firms typically raise higher risk vehicles, which could explain why there are fewer UK investors in funds raised by these firms since UK investors typically commit to funds with a lower risk/return profile.
The size of investors in funds managed by the top 10 firms does not differ much from that of investors in all private real estate funds. The only difference seems to be the proportion of investors that fall into the two largest size groups. 8% of investors in private real estate are those with assets of more than $50 billion; the corresponding figure for investors in the 10 largest firms is 15%. This suggests that larger investors are more likely to invest with the larger managers. The major firms attract the most prolific investors in the asset class, which have the capability to commit to larger funds.
The $236.6 billion California Public Employees' Retirement System (CalPERS) and the $153 billion California State Teachers' Retirement System (CalSTRS) each have approximately $17.8 billion allocated to real estate, making them the largest US pension funds in real estate. CalPERS has invested with four of the top 10 firms, and CalSTRS has committed to funds managed by five of the 10 firms.
29% of investors in the top 10 firms have assets of less than $1 billion. These investors are likely to make smaller fund commitments and therefore the larger managers have several foundations, endowments, and funds of funds committing between $1-10 million to their funds.