Entering the Realm of Real Estate
For a long time, BHA’s research team has focused its efforts on maintaining relationships with a worldwide network of hedge fund investors. Last year, after realizing a demand for private equity funds from many of these same investors, the firm expanded its network of managers to serve the private equity market. BHA is bridging the gap once again, this time by identifying investor mandates and managers from a third major segment of the alternative investment industry—real estate.
An article featured in BHA Investor Monitor, January 22, 2009, discussed increased investor interest in real estate funds during the fourth quarter. Since BHA’s team began interviewing a greater number of investors regarding their real estate fund mandates, one trend that has become evident is the appetite for value-added and opportunistic-style real estate funds as opposed to core and core-plus. Many experienced real estate investors share the belief that this market provides the perfect opportunity to commit capital to an investment that provides high returns relative to the level of risk. Additionally, while there is some demand for funds with global mandates, many investors are specifically intrigued by opportunities in the U.S. market.
These mandates are coming from investors all over the world. One consultant based in Switzerland that works with many large institutional investors as well as families and high-net-worth individuals, said that it finds the U.S. real estate market to be very interesting right now. It is hoping to make its second investment in a real estate fund within the next few months, and it will be looking to allocate to more than one manager.
Many in the alternative investment industry believe that there is no capital flowing into funds these days, only being pulled out. But it is important to realize that some investors have reduced allocations to hedge funds in order to add to other types of investments, including real estate. There is also a large market of long-term investors that would prefer to place their capital in value-added investments during the next few years. These investors have capital to allocate now and they’re looking for the right manager.