Real estate is more than a passing trend for global institutional investors, as evidenced by the growing number of allocations to the asset class of US$1 billion or more.
The number of investors joining the billion-dollar club grew from 442 in 2017 to 499 this year, according to a new survey by data and intelligence company Preqin Ltd. Public pension funds and insurance companies make up the largest proportion of these investors, at 28 and 21 per cent, respectively.
All told, investors in the billion-dollar club have allocated US$2.53 trillion to the sector, reaching 84 per cent of all the industry’s assets. Prequin also found, for those investors putting US$1 billion or more into real estate, the asset class is now making up a larger percentage of their overall portfolios, at 11 per cent, compared to other investors at just eight per cent.
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“The appeal of real estate in this regard is strong: opportunities for investment in the asset class are diverse both globally and across risk/return profiles,” said Tom Carr, head of real estate at Prequin, in a press release. “It also offers several different methods of accessing the asset class, from liquid REITs to long-term direct acquisitions of trophy assets. This allows investors to manage their liquidity and investment preferences without correlating their real estate portfolios more closely to public market investments. We may see more investors position themselves in anticipation of a market shift in the coming months and embrace real estate investments further, in which case the billion-dollar club could continue to swell.”
Prequin’s survey also highlighted that while Middle Eastern investors only make up two per cent of the category, they nevertheless allocate US$131 billion to real estate, representing five per cent of the category’s total allocation. Meanwhile, 47 per cent of these investors are European, 34 per cent North American and 10 per cent Asian.
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