Investment managers must “connect the dots” on overseeing both retail and institutional investor capital in real estate, said Anton Pil, JPMorgan Asset Management’s head of global alternatives. The platform manages over $100 billion in real estate, private equity, infrastructure, hedge funds and liquid alternatives for both retail and institutional investors.
Pil spoke with PERE about how the retail market for real estate investing must expand beyond real estate investment trusts. Because some retail investors’ real estate exposure is limited only to their homes and other personal real estate assets, managers must prioritize investor education to tap this market, Pil said.
Like institutional investors, retail investors’ needs are better served when they can invest in commercial real estate for a diversified portfolio, he added.
Generally the average individual’s allocation to real estate is significantly lower than an institution’s allocation to RE. Institutions will often have as much as 10 or even 15 percent in real estate. Individuals that number is significantly lower and often gotten through REITs.
Part of the reason we don’t see bigger penetration in the retail market is there just aren’t that many vehicles available for retail consumers or retail buyers to allocate to owning an office building or a warehouse. I think we’re going to see that change over the next several years. I think it can play a very important role for the average individual investor, especially as you get the demographic shift. As people look to retire, they’ll look for a steadier form of income.
Having exposure to office buildings, residential buildings, industrial buildings and even malls plays an important part in an individual’s portfolio asset allocation.
How do we connect what we know what individuals ultimately want and educate the individual investor about this asset class that has been quite difficult for them to access? How do we connect those dots with the fact that we’re already managing a large pool of assets predominantly for defined benefit and other institutions and endowments? It’s incumbent upon the industry to connect those dots. I think that’ll be through combinations of different vehicles and delivery mechanisms that are more amenable to smaller bite sizes. That’s going to be more appropriate for individuals.
People are doing work in the space, including us, and I think we’ll all come up with something that hopefully addresses the needs of most individuals.
With additional reporting by Jordan Stutts