There is a reason why the biggest managers of institutional real estate capital keep getting bigger. As other financial asset classes sputter along during these cyclically high times, the music continues to play for this asset class and those managers that have proved their worth over the years continue to reap the benefits.
According to the Real Estate Allocations Monitor 2018, the latest in an annual piece of research, co-authored by Cornell University’s Baker Program in Real Estate and capital advisory group Hodes Weill & Associates, real estate portfolios generated 50 basis points more performance in 2017, 9.2 percent versus 8.7 percent in 2016. Understandably, commitments continued to come from institutions which have, on average, upped their allocations by 30bps to 10.4 percent last year.
What’s more, as prime yields continue to compress, and fears of a correction grow, investors are increasingly favoring value-add strategies, the likes of which are included in PERE’s signature manager ranking, over lower yielding core offerings. “Core assets are currently richly priced and thus susceptible to potential price corrections,” says independent capital advisory firm Wellershoff & Partners in a white paper published last month. “To match their allocation to private real estate, investors can invest in private real estate value-add or opportunistic funds.”
The Real Estate Allocations Monitor 2018 agrees, with 90 percent of its respondents reporting they are actively focused on value-add strategies, versus 63 percent on core.
Naturally, those managers with demonstrable track records in higher risk and return investing have been making hay, fundraising bigger and bigger amounts for their various fund series. In the case of private real estate’s biggest 100 managers, $442.3 billion in the last five years to be precise.
Welcome to the first PERE 100, the sector’s comprehensive look at the capital raising exploits of the best supported private equity real estate managers in the world.