This week saw the relaunch of PERE’s ranking of managers by discretionary capital raised for value-add and opportunity strategies over the last five years.
The ranking, now double in size, is the comprehensive global guide to the best supported managers in private equity real estate. The list is critical to understanding which organizations are most expected to deliver the top performances. Click here for PERE’s full analysis of the ranking. Meanwhile, here are five observations:
1. The equity inequality show: When it comes to private real estate’s higher risk and return strategies, the message is clear: investors are increasingly comfortable congregating with the sector’s biggest managers. At $182 billion, the top 10 managers included in PERE’s ranking account for 42 percent of the $442 billion aggregate; the top five account for over a quarter at $130.5 billion. Sector champion Blackstone alone accounts for about 12 percent with its $55 billion haul. Unsurprisingly, six of the top 10 managers have set records at their firms with the size of funds raised in the last year.
2. The Blackstone gap widens again: The New York giant’s five-year haul is now $25.5 billion more than the $29.5 billion collected by closest rival Brookfield – widening last year’s $20 billion gap. The spread is likely to grow next year too: Blackstone’s sixth European opportunity fund is set to close on $10 billion; no massive funds are likely to fall out the five-year catchment; and Brookfield just closed on its $15 billion Brookfield Real Estate Strategic Partners Fund III this year. The gap between the ranking’s top two firms is still, nonetheless, narrower than in 2016 when it was as much as $35 billion.
3. North America dominance reduced: Private equity real estate investing is no longer a purely North American vocation. While managers from the region still dominate the ranking – with 81 percent, or $359.5 billion, of the aggregate – the percentage has fallen since last year, when 88 percent of the $333.75 billion aggregate came from North American-based managers. This year’s PERE 100 saw 10.5 percent raised from Europe and 8 percent from Asia, up from 7 percent and 5 percent, respectively, last year. Another regional takeaway was the number of Europe-based managers that had been hovering below the PERE 50: 12 of the 20 European managers occupy positions between 50th and 100th. They were previously just out of sight.
4. A greater buying force: While global investment volumes are predicted to moderate or reduce, PERE’s top 100 fundraisers are ignoring the big picture as they net buy more today than last year. According to real estate transactions research firm Real Capital Analytics, they purchased $202 billion last year, some $34 billion more than the $168 billion they sold. By contrast, they sold $25 billion more than they bought in 2017. RCA said the PERE 100 managers’ outlays reflected 24 percent of all stabilized asset purchases globally in 2018 versus 20 percent in 2017, showing their growing relevance as an investing force.
5. The riders and the sliders: PERE’s signature manager ranking has its ever-presents: private real estate’s juggernaut Blackstone being the obvious pick, though North American peers Carlyle and Starwood are also among the fixtures. However, from its first iteration in 2008, when it was the PERE 30, 50 percent of the managers have been consigned to history, among them platforms from investment banking’s Lehman Brothers, Deutsche Bank, Citigroup and Goldman Sachs. Bank of America Merrill Lynch also came and went. Nonetheless, just as Morgan Stanley conversely went and came back, expect one or two other banks to find their way back onto private equity real estate’s most comprehensive manager list. PERE is aware of one such institution already plotting its comeback. More on that to come.
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The Macquarie PERE Global Investor 50 is now open for submissions!
Speaking of rankings, the Macquarie GI50, PERE’s annual list of the world’s leading investors in private real estate is in its latest research phase. The 2019 ranking is based on the amount allocated to private real estate as of March 31 2019.
We are seeking your help to ensure the ranking is as accurate as possible: to be considered for the ranking, please email Jesse Koppi, senior research associate, at email@example.com
Deadline for submissions: June 15, 2019