This week I was at a gathering of about 300 pension funds, endowments, foundations, consultants and oh, yes, investment managers. What brought us together was IREI's VIP conference. But what kept us together was the gaining of understanding of where we are in this world of institutional real estate investment. And, from what it sounded like to me, we aren't much further along than we were in 2009.....yet. Some of the enlightenment came from the announcing of some of the results of the 14th annual IREI/Kingsley Survey of U.S. Pension Funds which will be available for public consumption in April and some from the Quik-Talley questions taken at the event. Here are some of my takeaways:
1. New Normal Returns: Core, 6%; Value-Add, 8-10%; Opportunistic, Mid-teens
2. 40.9% strongly agree that core strategies will predominate in 2010
3. Investors see decreased target allocations to opportunistic strategies
4. $34Bn in new capital expected to be committed by U.S. Tax-Exempt investors (vs. $18Bn in 2009)
5. Investors will increase their emphasis on separate accounts with existing manager relationships
6. Multi-family is far and away the most attractive property type for 2010.
7. There are currently 614 funds offered by 480 managers in the market
8. Regional funds and country specific funds are more popular than global strategies
And here are a few actual quotes (from consultants):
1. "Every manager that comes to the table to day has a poor track record or no track record which makes it difficult to evaluate them."
2. "The level of fees is not as important as the structure of them."
3. "The most common change to terms we're seeing is a one-year extension of the investment period."
4. "The most common change to fees is a reduction in Asset Management fees (by and average of 28%)"
5. "The first 'screen' in evaluating a manager: is there a strategic fit with the investors existing portfolio and objectives."
Okay, so there is some of the stuff that I heard from the stage. What did I learn from individual conversations with people? Well, I'm not going to share that with you as that's stuff that I may be able to benefit from personally. But the overall mood was optimistic and realistic. Things are moving slower than people had hoped but it's not like things have turned from dark to light just because we started a new year. There seems to be a strong interest in debt, distressed and otherwise. There is also an interest in recapitalizations. However, so you don't have to rely on me totally for insight I suggest you seriously consider attending this conference next year.
BTW, the venue for the VIP Conference was one of the most spectacular pieces of real estate I've ever seen. Terranea Resort in Palos Verdes, California offers almost 360 degree views of the Pacific Ocean. This photo is a rainbow that came out for just a few minutes after the rain stopped. The photo was taken just outside my hotel room.
On the road....
2/17-19: Raleigh/Durham for meetings and to be a judge in the UNC Kenan-Flagler Real Estate Challenge
3/14-25: Boston to attend the PREA Spring Conference
4/12-14: Dallas to attend the UBS Annual Client Conference
4/21-23: Venice to attend the Annual INREV Conference
These are my views and not that of my employer.
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