The world’s biggest issuers of capital are backing their words with action. Declaring an increasing interest in higher risk and return strategies as core yields compress to unattractive levels, institutional investors are today showing greater support for investment vehicles set up to create prime real estate and less support for those whose purpose is just to hold it. According to the European Association for Investment in Non-listed Real Estate Vehicles, for example, 49.4 percent of a sample pool of 85 investors prefer value-add strategies today, up from 41.1 percent five years ago. INREV noted 18.8 percent preferred opportunistic strategies, up from 7.1 percent in the same timeframe.
Accordingly, PERE’s flagship ranking, the PERE 50, is reflecting a marked uptick in fundraising. At an aggregate of $333.75 billion, there was almost 20 percent more capital raised for the top 50 value-added and opportunistic real estate fund managers this year than last. Subsequently, at the top end of the ranking a $20 billion-plus club has materialized. It has a three-strong membership of Blackstone, Brookfield and Starwood with Lone Star Funds knocking on the door; that club consisted of Blackstone only last year. Similarly, the number of managers having raised more than $10 billion in the last five years has grown from four to seven, with Carlyle, GLP and Pimco joining the aforementioned firms.
In a further indication of greater collections of capital by private real estate’s manager cohort, the minimum amount of capital raising required to make the ranking this year was $2.57 billion, up about 6 percent on last year and a whopping
80 percent on five years ago, when the ranking switched from the PERE 30 format. Then, 50th place qualified with just $1.3 billion; that haul would snag 82nd place today. Indeed, for the first time, even place number 100, Rubenstein Partners, came in at $1.08 billion, and that is prompting PEREto consider doubling the size of this ranking in the future.
Meanwhile, beyond the big picture, this year’s ranking has thrown up other themes and stories. For instance, traditionally dominated by North American-based investment managers, the proportion of managers represented from elsewhere has risen from 10 last year to 12 this year. GLP, Gaw Capital, e-Shang Redwood, Meyer Bergman, Kildare Partners, Partners Group, Orion Capital, Keppel Capital, Aermont Capital, PAG, Patrizia and Tristan Capital are included this time around.
Furthermore, it is a non-North American firm, ESR, the Singapore-based logistics real estate investment manager, that is this year’s highest climber. A new entrant, the firm starts life on the ranking at a respectable 29th position. The biggest faller, on the other hand, was a US firm, Fortress Investment Group. The SoftBank-owned alternatives investment manager is today perching perilously close to the ranking’s trap door in 48th position, having collected $2.6 billion for higher risk and return private real estate strategies over the last five years. The fact that is a decreasingly significant amount on a relative basis shows how popular these strategies are in absolute terms. Investors want these products and have backed their ambitions with commitments.
The Swiss bank has laid out ambitious AUM targets for infrastructure and private equity after combining the asset classes with its bigger real estate business to form the Real Estate and Private Markets platform.