STATESIDE: The new F word

When it comes to rebranding, nothing is as paramount as a new name in helping a business to promote a new identity. That new name, however, may not do much good if the platform doesn’t do a good job of explaining its new identity to investors.
Last month, CBRE Global Investors announced that it was changing the name of its CBRE Global Multi Manager platform to CBRE Global Investment Partners (GIP). GIP now prefers to identify itself as the indirect real estate arm of CBRE Global Investors, and distinct from the direct business in that it always invests with operating partners.
The driving factor behind the change was to better reflect the services that the platform now provides. “For many people, the term multi manager has just meant fund of funds,” said Jeremy Plummer, GIP’s chief executive officer. “As our investment approach expanded, we realized we needed a name that conveyed not only our global investment scope but also the breadth of investment vehicles that we utilize.”
In fact, GIP hasn’t been operating as a fund of funds – where a business raises a fund to make primary investments, or investments in other funds – in years. Pre-crisis, primary investments accounted for 85 percent of GIP’s business, while secondary investments, joint ventures and coinvestments made up the remainder, according to Plummer. By 2010, however, the platform had shifted dramatically to 40 percent secondaries, 20 percent primaries and 40 percent JVs and coinvestments. The business has continued to transition over the past couple of years, with its current allocation mix being 50 percent joint ventures and coinvestments, 30 percent primaries and 20 percent secondaries.
The problem, however, is the stigma attached to real estate fund of funds, largely because of the double-fee structure relating to primary investments, where a limited partner is required to pay a fee to both the fund of fund manager as well as the underlying real estate manager. By rebranding, CBRE GIP therefore is aiming to distance its platform from those negative associations – and it’s far from the only business with such a goal. 
Partners Group, for example, has been outspoken about its aversion to the word “fund of funds,” and has famously called it “the F word.” The firm currently is raising a real estate vehicle that will invest in primary investments, secondaries and joint ventures and co-investments. The fund has neither “fund of funds” or “multi-manager” in its name.
What’s important to note, however, is that many firms began labeling themselves multi-managers instead of fund of funds over the past several years, for the very reason that fund of funds have gotten a bad rap in the industry. But as CBRE GIP’s rebranding indicates, such a word swap hasn’t done much to improve matters. Many investors, after all, still automatically view fund of funds and multi-managers to be one and the same. Multi-manager, one might say, is the new F word.
An executive at one real estate multi-manager platform was supportive of CBRE GIP’s rebranding, noting the limitations of the term. “I never really liked the moniker of ‘multi-manager,’” he said. “I think that it is a smart change that more broadly describes what Jeremy and his team are trying to do.”
The problem was that for a number of platforms, the change was in name only. “Among the firms that call themselves multi-managers, some didn’t change their business much,” Plummer notes. “To differentiate further from that pack, we’ve taken a further step in relation to our name.” 
But rebranding alone isn’t going to distinguish one indirect real estate platform from another. All that a would-be investor needs to do is see who’s on the team of that platform to realize it is the same business that it has known for years. What some indirect real estate platforms should be focusing on instead is educating prospective clients about how their investment strategies have changed in the past several years, particularly in shifting their focus away from funds. 
For instance, these businesses would be wise to point out to investors how their teams have developed in tandem with the evolution of their investment strategies. 
To use CBRE GIP as an example, its expanded platform has required its staff to have different skill sets than when it was focused on investing in funds. This has led the business to boost its headcount from 27 in 2008 to 66 currently, and make new senior hires with a significant amount of real estate transaction expertise.
Because false perceptions about fund of funds platforms have become so ingrained in the minds of many investors, educating those investors should be of the utmost importance for these businesses. We’d argue that if these indirect real estate platforms are doing a solid job of communicating with prospective clients, a name change may not even be necessary.
At the same time, educating investors stands to be a complicated task, at a time when many indirect real estate platforms remain in transition. Businesses such as CBRE GIP, after all, have undergone a dramatic transformation in the past five or so years, so there’s no telling how they may continue to evolve. But given how much evolution already has occurred, a more concerted effort to convey that message to the industry is in order. A mere name change only takes you so far.