Can LPs direct investments outperform real estate fund managers?
Some of the world’s biggest investors are betting they can beat real-estate fund managers at their own game, as reinforced by a recent Wall Street Journal article.
Challenging the traditional fund manager investment model, major LPs have been expanding their in-house real estate divisions to start acquiring property directly as a consequence to disappointing performance and increasing fees of so-called pooled funds. This strategy has been noticed from large institutional investors like Canada Pension Plan, Abu Dhabi Investment Authority and Harvard Management Corporation.
"When we can control what we buy, and how we manage it, our results tend to be better," said Jane Mendillo, head of the company that manages Harvard’s $32 billion endowment, which is the largest college endowment in the U.S.
In a poll of 472 investors world-wide with $10 billion or more in assets, 80% said they were either investing in real estate directly or considering it, according to Preqin, which tracks alternative investments. Which explain the recent struggle from private equity real estate groups to raise capital for new funds.
Although the trend is real, some industry observers disagree with the generality of this direct approach, since only the large institutional investors have the size and resources to structure a team which can manage the acquisitions, and then the properties, themselves. The new model can also generate conflicts when new joint ventures are structured, since both parties may have their own direct investment management structure and guidelines.
At the Real Estate Investment World Latin America 2012 conference, taking place in October 2nd and 3rd in Miami, Florida, institutional investors, funds of funds and fund managers will be discussing how these trends and change of strategies apply for real estate investments in Latin America.
So, don’t miss the opportunity to be involved in the most comprehensive Latin America real estate conference for international investors and register today!
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