Non-listed funds still vehicle of choice for majority of investors

As institutional investors search for ever greater control over their investment vehicles, there is much talk of joint venture and separate mandates – and, in fairness, many investors have taken concrete steps to move away from pooled investment vehicles in favour of a much more tailored approach. However, a new survey by non-listed real estate association INREV, in partnership with its Asian counterpart ANREV, shows that a big majority still invest their money into non-listed funds.

According to the survey, separate mandates investing both directly and indirectly into real estate account for slightly over a fifth - or 20.2% - of the total assets under management in the global property industry. Including joint ventures, the figure comes to just 23.5%. By contrast, non-listed real estate funds account for 56.3% of the total. Real estate securities funds account for 7.8% while the category ‘other’ which mainly includes listed real estate funds accounts for 9.8%.

The findings are based on a survey of 122 fund managers with total real estate assets under management of €1.26 trillion.

”Non-listed real estate funds are still a very big business,” commented Casper Hesp, research director at INREV. “I don’t see that changing all that quickly. Joint ventures and separate accounts are often less transparent from a market perspective,” he added.

Earlier this year, the annual INREV Investor Intentions survey found that 39% of investors expected to increase their allocations to joint ventures, down from 67% the previous year. In practice, however, just over 3% of investments in non-listed real estate are tied up in joint ventures, the fund manager survey found. About 12% of investors said they aimed to increase their allocations to separate accounts, with German investors targeting a significantly higher figure of almost 40%.

The survey also found that that the Blackstone Group is the largest fund manager for direct real estate vehicles globally with a total value of €52.7 billion, all of which is held in real estate funds. Other larger managers such as Morgan Stanley and CBRE Global Investors also have large direct portfolios, but significant parts of the total assets under management is in indirect property such as securities. Overall, direct real estate vehicles account for €1 trillion - or 80% - of total real estate assets under management worldwide.

The largest non-listed real estate fund manager of European funds is CBRE Global Investors with €18.6 billion under management. In Asia Pacific, it is AMP Capital with €9.4 billion, while in North America the number one player in funds is JP Morgan Asset Management at €21.9 billion. For funds with a global investment strategy, the Blackstone Group is the largest player with €25.9 billion.