Schroders Capital has launched its first global private real estate fund, the Global Real Estate Total Return fund, PERE has learned.
The vehicle is the latest in Schroders Capital’s series of ‘semi-liquid funds’ aimed at ‘democratizing’ private assets. The semi-liquid funds – of which the firm has raised three in private equity to date – allow investors to subscribe on a monthly basis and redeem quarterly. Investor commitments in the fund are not subject to a lock-up period.
PERE first reported in July that the private markets division of asset manager Schroders was planning to launch its first global private real estate strategy, which would have allocations to all three geographical regions and be available to capital from both private and institutional investors, in the third quarter of 2022.
Schroders Capital raised seed capital from Schroders in December and began formally marketing the fund earlier this year. Initial third-party capital has come from a European investor that previously backed Schroders’ prior semi-liquid funds in private equity. The firm is offering “permanently discounted fee economics” to investors that commit to the first $100 million raised in the fund, according to Kieran Farrelly, head of real estate solutions at Schroders. Farrelly, along with portfolio manager Yim-Mei Liew, will oversee the fund.
GRETR will be available to a broad range of investors but is primarily targeted at individual and smaller institutional investors such as family offices, Farrelly added. “A key objective of the fund is to enable these investors to access what would otherwise be ‘out of reach’ institutional real estate opportunities through Schroders Capital’s real estate platform,” he explained.
Through the fund, Schroders Capital will invest in all four quadrants of real estate – private equity, public equity, private debt and public debt – with 25 percent investment limits to both public equity and public debt strategies. The fund’s real estate debt allocation will be focused on high-yield private investments in the US and Europe, where the firm sees “compelling relative value,” Farrelly said.
“The strategy of the fund has been intentionally designed to capitalize upon a broad global opportunity set and will be thematically led, targeting our preferred sectors driven by secular trends,” he added.
To date, the fund’s capital has been deployed into publicly traded equities anchored by strong operators, with those investments generating an approximate 4 percent total return since December. The firm also just closed on a discounted secondaries transaction in a UK income-focused strategy that has seen significant repricing.
“Given the price adjustments underway across major markets, the fund is very well positioned, with dry powder and no legacy issues, to capitalize upon attractively rebased opportunities as they emerge,” Farrelly said. “We have a well developed pipeline including focused direct co-investments” in specific assets or portfolios. The fund’s portfolio will be allocated to a mix of income and growth-focused strategies.
Schroders Capital chose to focus its first global real estate fund on high-net-worth capital as opposed to institutional capital because of the changing composition of the private real estate investor base. “Private markets continue to evolve and is broadening from what have historically been only accessible to institutional investors, owing to the increased time and complexity of execution,” Farrelly explained.
“There is now significant interest from high-net-worth and affluent individual investor profiles, in particular,” he added. “This is rising fast, albeit their typical portfolio allocations remain materially lower than that of institutions. A key initiative for Schroders Capital is to address this and further ‘democratize’ private asset classes.”
As part of this democratization drive, Schroders announced last week it received approval from the UK’s Financial Conduct Authority to launch the first Long-Term Asset Fund. LTAF refers to a regulated open-end investment vehicle designed to enable a broader range of long-term investors to invest in illiquid and private assets.
Meanwhile, the semi-liquid fund series was launched in late 2019 and had grown to more than $1 billion of AUM as of September 30, 2022.
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