Alternative methods of accessing the private real estate market, including separate accounts, joint ventures and co-investments, are under the spotlight in this extract from the Preqin Investor Outlook: Alternative Assets, H2 2015.
Recent years have seen an increase in institutional investor appetite for alternative structures, which offer the investor a variety of benefits over the traditional commingled fund model, including greater control over their real estate portfolio, lower fees and a greater level of exposure to attractive assets. Fig 1 illustrates that the proportion of investors that will invest through separate accounts has steadily increased since 2011, with 39 per cent of all institutional investors in real estate investing, or considering investing, in separate account mandates as of Q2 2015.
Appetite for separate account structures differs significantly across investor types; 53 per cent of asset managers are investing, or considering investing, in separate accounts, the largest proportion of any investor type (Fig 2). Public pension funds and family offices are also likely to invest through these structures, with 42 per cent and 45 per cent of both investor types investing or considering doing so respectively. Investors with significant assets under management hold sufficient resources to benefit from the economies of scale presented by separate accounts, benefitting from the likely more favourable terms and greater control and are therefore more likely to follow this route.
While the proportion of investors that will invest through separate accounts has grown in recent years, it is interesting to note that many investors appear to be scaling back their outlay to separate accounts and other alternative structures. A greater proportion plan to reduce the amount of capital they invest through these structures in the coming year than plan to increase it (Fig 3).
This is an extract from the Preqin Investor Outlook: Alternative Assets, H2 2015; click here to download the full report for free.