At PERE, we think capital support is actually the purest measurement. Certain managers are able to tap the listed markets for capital, but, largely, it is the commitments from institutional investors that provide the sector’s lifeblood.
From 1,000 feet, the sector appears in rude health, awash with capital. Turbulent macroeconomic conditions places real assets at the top of most institutional wish-lists, and, as that grouping's most institutionalized asset class, real estate sits in the vanguard. Today, as the market’s prime assets are snaffled up, risk is more widely accepted and managers operating value-added and opportunistic strategies are benefiting every bit as much as their core-focused contemporaries.
Let air out the balloon a little and you’ll notice not all managers are benefiting equally. Take our PERE50 annual ranking of value-added and opportunistic capital raisers, for instance. The top 10 managers vacuumed 55 percent of the $271 billion of capital collected, $149 billion. Blackstone, currently the sector’s undisputed champion, raised 36 percent of the capital raised by the top ten: more than the second, third and fourth managers combined. Those firms, Lone Star Funds, Brookfield Asset Management and Global Logistic Properties, raised more than the next seven combined.
What other things does the ranking tell us? For one, if capital support is healthy for a firm, chances are its returns are likely to have been consistently strong and that its assets under management are likely to be numerous. Blackstone has generated annualized returns of 18 percent, after fees, since 1994. Its assets passed the $100 billion barrier last month.
It also tells us that institutions are happier today than any time since the global financial crisis of 2008 to back the farthest reaching, most flexible strategies: the top 10 funds raised in the last half-decade carried global investment strategies. Specialist operator funds remain popular, particularly among the biggest institutions, but funds that are neither large generalists nor small specialists are more challenged.
Additionally, it tells us, today fewer managers are going without, even if some groups are hauling mega-funds. Last year, it took $1.78 billion to make the PERE50. This year, $2 billion was needed.
Real estate’s soothsayers remain concerned about black swans around the corner. For now, the sector’s purest indicator is positive.