Winding down for the holidays? Not likely.
The likelihood is, whether investment manager, investor or advisor, you have more rather than less work to do today than you had at the start of 2015.
If you’re a manager, you may be stepping up your deployment efforts so that you can go back to raising fresh capital before either insatiable competition for assets or interest rate rises drive cap rates to below-acceptable risk premiums over safer fixed-income assets.
If you’re an investor, you’re probably mindful of the intensifying competitive environment, but also engaging with more managers than before to satisfy the appetite for ‘illiquids’ such as real estate of your superiors. While you want to allocate more equity to fewer managers, even the Blackstones, Lone Stars and Starwoods of this world cannot justify accommodating every dollar that knocks on their doors. Trickle-downs to lower-tier managers are inevitable.
Certainly the music in private real estate is playing as loudly as ever: pre-crisis investment volumes have been reached and, in many cases, surpassed across the sector’s various marketplaces. Exactly where we are in the current growth cycle is anyone’s guess: analyzing historical patterns gives cause for concern, but outside of a black swan event it is hard to see what would trigger a slowdown or reversal of current trajectories.
And yet, while there is plenty to celebrate, specters also remain. The impact of reduced or removed artificial fiscal stimulation from major economies including the US, the Eurozone, China and Japan remains hard to quantify. Meanwhile, episodes of conflict and terrorism are increasing in frequency, which is provoking some extreme reactions as well as interesting alliances from some of the countries impacted, whether in terms of their direct response to the threat or in their dealings with each other.
As such, there is plenty to mull over the festive period – not just the wine. We at PERE shall certainly mull pretty hard as we map out our editorial strategy for 2016.
Nonetheless, we will allow for a toast or two to cap off another very busy and productive year. You should do the same. No doubt you’ve earned it.