Institutional real-estate for institutional investors
Building a real-estate portfolio
Property assets have the potential to generate higher returns than fixed income assets with lower volatility than equities. There are a wide variety of vehicles and strategies to choose from when constructing your real estate portfolio. We can help you select an appropriate strategy based on your risk tolerance and investment objectives.
Typically long-term, real-estate investments have holding periods that vary according to region, strategy and asset manager. Fundraising and capital deployment, like other private markets asset classes, can take months or even years as asset managers identify and assess appropriate opportunities.
For some real estate investments, you need to have capital available to deploy as opportunities arise. However, some private real estate funds (typically core-style investments) offer access to an existing pool of real estate opportunities that can be invested in within a few months. You should consider diversifying across vintage years for higher risk real estate investments as well as across managers, strategies and geographies.
Real-estate investment opportunities
Investing in real-estate means you are participating directly in the real economy. Whether you’re allocating to offices, industrial buildings, residential property, or alternative types of real estate such as data centres, you’re having a direct impact on local communities and businesses. These assets have tangible environmental and social impacts that should be considered as part of your investment strategy.
Our real-estate team works in partnership with our dedicated sustainable investment and infrastructure teams, conducting assessments and sharing the latest research to help ensure you have a full picture of the impact of your allocations.
Environmental considerationsFactors such as pollution and energy are key considerations for newly built and existing assets. Improving these could help you on your mission to find an optimal balance between doing good and meeting your goals.
Social impact considerationsReal-estate can have a strong influence on social issues. You could invest in social housing or support communities by allocating to assets that promote employment and provide essential facilities.
There are many approaches to real-estate investing, with the various strategies offering a wide range of expected returns. This is mainly due to the variation in implied risk of the underlying real estate. The fund structure in which strategies are offered can also make a difference.
Most lower-risk real-estate funds are what we call semi-liquid, provided in perpetual, open-ended fund structures targeting returns driven primarily by income. Value-add and opportunities real-estate, often referred to as private equity real-estate, is on par with other private market solutions. This strategy focuses on value creation in closed-ended structures.
Core real-estateThis refers to high-quality properties located in the strongest locations, such as capital cities and other large urban areas. They are typically long-term assets and are highly sought after offering a moderate level of liquidity.
Core plus real-estateThese are properties considered high quality but with some scope for upgrades, which could enhance returns over time or when concentrated in one property sector.
Value-add real-estateThese are properties that require repositioning or redevelopment to enhance their attractiveness and maximise their use. These assets tend to be less liquid but have the potential for higher returns.
Opportunistic real-estateThis includes distressed properties or debt, ‘ground-up’ development projects, and entity-level investing. These investments have a higher level of risk including illiquidity risk as it is more difficult to exit positions quickly.
- 1 1. Determine your risk appetite
- 2 2. Identifying managers and opportunities
- 3 3. Implementing your strategy
The first step in real-estate investing is understanding your risk appetite and approach. You should also decide whether you want to take a global, regional or local approach.
We can help you select what we believe to be the best managers and strategies for satisfying your risk appetite and return targets.
The difference in investment return profiles among various funds can be significant. You should understand the fund’s investment strategies and how each manager approaches underwriting and asset sourcing. By looking at the track records of existing and previous investments, you can determine the strength and depth of a fund’s team and platform. The manager you select should be aligned with your vision.
Real-estate investing is a unique asset class, so make sure the managers you choose have sufficient expertise and operational resources to execute their strategies.
Our global manager research team has a long history of identifying quality real-estate asset managers. We keep a firm pulse on the real estate industry, ensuring you have the most up-to-date information on managers, strategies and markets.
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