Real Estate Spotlight is the monthly newsletter published by Preqin packed Real Estate Spotlight full of vital information and data, all based on our latest research into the May 2015 private equity real estate industry. Real Estate Spotlight combines information from our online product Real Estate Online and the newly Feature Article launched 2015 Preqin Sovereign Wealth Fund Review. Sovereign Wealth Funds Investing in Real Estate May 2015 In an extract from the recently launched 2015 Preqin Sovereign Wealth Fund Review, we Volume 9 - Issue 3 provide an insight into this secretive and exclusive subset of the investor community. FEATURED PUBLICATION: Page 2 The 2015 Preqin Sovereign Lead Article Wealth Fund Review Northeast US Real Estate The 2015 Preqin Sovereign Wealth Fund Review Preqin takes a detailed look at the private real estate market in the Northeast US, including the latest fundraising data and information on investors based in the region. Page 7 In association with: alternative assets. intelligent data Preqin Industry News To find out more, download This month we take a look at sovereign wealth funds that have recently committed to sample pages or to purchase your private real estate funds and those that are targeting new fund commitments. copy, please visit: Page 11 www.preqin.com/swf On the Network New York: We examine the activity of investors on Preqin Investor Network to see which fund strategies One Grand Central Place and geographic regions are of current interest to investors, as well as which institutional 60 E 42nd Street investor types have been proactively looking at funds in April. Suite 630 New York, NY 10165 Page 13 +1 212 350 0100 The Facts London: 3rd Floor, Vintners’ Place Fundraising Update - The latest fundraising statistics for 2015. Page 14 68 Upper Thames Street London Japanese Private Real Estate Market - Fundraising, fund managers, investors. Page 16 EC4V 3BJ +44 (0)203 207 0200 Conferences - Upcoming real estate conferences around the world. Page 19 Singapore: One Finlayson Green You can download all the data in this month’s Spotlight in Excel. #11-02 Wherever you see this symbol, the data is available for free download on Singapore 049246 Excel. Just click on the symbol and your download will begin automatically. +65 6305 2200 You are welcome to use the data in any presentations you are preparing; please cite Preqin as the source. San Francisco: 1700 Montgomery Street Suite 134 Sign up to receive your free edition of Real Estate Spotlight every month! San Francisco CA 94111 www.preqin.com/spotlight +1 415 835 9455 w: www.preqin.com e: [email protected] Twitter: www.preqin.com/twitter LinkedIn: www.preqin.com/linkedin BEST INFORMATION AND alternative assets. intelligent data. DATA VENDOR Feature Article Sovereign Wealth Funds Investing in Real Estate Download Data Sovereign Wealth Funds Investing in Real Estate In an extract from the recently launched 2015 Preqin Sovereign Wealth Fund Review, Lauren Mason, Amy Bensted and Oliver Senchal provide an insight into this secretive and exclusive subset of the investor community. Sovereign wealth funds, despite being small in number and Fig. 1: Aggregate Sovereign Wealth Fund Assets under secretive in nature, continue to capture attention as a result of Management ($tn), 2008 - 2015 their ever growing assets under management and corresponding infl uence on global fi nancial markets. Today, the total assets of 7 sovereign wealth funds top $6.31tn (Fig. 1), more than double the 6.31 6 capital these entities represented in 2008, the year Preqin launched 5.38 its fi rst Sovereign Wealth Fund Review. 5 Other Commodity 4.62 Investing in Real Estate 4 3.95 Non-Commodity 3.59 3.22 Traditional investments, such as equities and fi xed income 3 3.07 Hydrocarbon securities, are widely used by sovereign wealth funds and are a Total Assets under Management ($tn) 2 relatively stable part of the portfolios of these investors (Fig. 2). Management Alternative assets have emerged as an increasingly important Aggregate SWF Assets under 1 portion of the portfolios of many sovereign wealth fund investors over recent years, as these investors seek to diversify their 0 portfolios and acquire assets that can generate yield and help them meet their long-term objectives. Mar-15 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Investments in real assets are the most common route into Source: 2015 Preqin Sovereign Wealth Fund Review alternative investment by sovereign wealth funds in 2015, with signifi cant growth in the proportion of sovereign wealth funds that $1.5bn more than it targeted. Among the investors in this fund is allocate capital to real estate since the publication of the 2013 the sovereign wealth fund New Mexico State Investment Council, Preqin Sovereign Wealth Fund Review. The increased appetite which allocated $75mn to the record-breaking vehicle. for real estate from sovereign wealth funds and other institutional investors, the improving fundraising environment and increases in Over half (59%) of all sovereign wealth funds currently invest in real real estate asset valuations have enabled the private real estate estate. This comprises some of the largest sovereign wealth funds market to enjoy a period of success; private real estate assets in the world, including Abu Dhabi Investment Authority (ADIA), under management reached an all-time high of $742bn at the GIC and Kuwait Investment Authority, which all have over $18bn end of 2014. In March 2015, Blackstone closed the largest ever allocated to real estate. Nearly a third of all sovereign wealth funds closed-end real estate fund after successfully raising $14.5bn, do not invest in real estate, often due to government mandates Fig. 2: Proportion of Sovereign Wealth Funds Investing in Fig. 3: Breakdown of Sovereign Wealth Funds’ Current and Each Asset Class, 2013 vs. 2015 Target Allocations to Real Estate by Proportion of Total Assets 100% 60% 57% 90% 86% 86% 82%81% 80% 50% 45% 70% 59% 60% 60% 57% 2013 40% Current 54% 36% 51% Allocation 50% 47% 32% 2015 40% 33% 30% 31% Target 30% 24% Allocation 20% 20% 10% 14% N/A 9% 0% 10% 7% Proportion of Sovereign Wealth Funds Proportion of Sovereign Wealth Proportion of SWF Investors in Real Estate 0% 0% Less than 5-9.9% 10-14.9% 15% or More Real Estate 4.9% Infrastructure Hedge Funds Private Debt* Private Equity Fixed Income Public Equities Proportion of Total Assets under Management Source: 2015 Preqin Sovereign Wealth Fund Review Source: 2015 Preqin Sovereign Wealth Fund Review *Please note: Preqin has only been collecting private debt information on sovereign wealth funds since 2014. To find out more and to order your copy, please visit: www.preqin.com/swf 2 Real Estate Spotlight / May 2015 © 2015 Preqin Ltd. / www.preqin.com Feature Article Sovereign Wealth Funds Investing in Real Estate Download Data Fig. 4: Proportion of Sovereign Wealth Funds Investing in Real Total Assets under Management Estate by Total Assets under Management Historically, larger sovereign wealth funds, with the capabilities 100% 100% 100% and expertise to run a globally diversifi ed portfolio, have shown a 90% greater preference for investing in real estate. Fig. 4 shows that all 80% 78% sovereign wealth funds with over $100bn in assets are currently 70% 64% investing in the asset class. The $773bn ADIA invests between 5% 60% and 10% of total assets to real estate through direct, listed and 50% private real estate. Conversely, smaller sovereign wealth funds are 41% Estate 40% less likely to invest in real estate. Forty-one percent of funds with 30% total assets of $1-9.9bn are investors in real estate, while only 13% 20% of funds with less than $1bn in assets invest in the asset class. 13% 10% The $3bn North Dakota Legacy Fund has its real estate portfolio Proportion of SWF Investors in Real 0% entirely invested in private real estate funds, indicative of larger sovereign wealth funds having the capabilities and capital to access the asset class through all routes to market; smaller funds $1-9bn $1bn $250bn or More $10-49bn $50-99bn Less than have a more limited scope, if at all. $100-249bn Total Assets under Management Location Source: 2015 Preqin Sovereign Wealth Fund Review Real estate investments are most attractive to North America- preventing them from doing so. The Kevin P. Reilly Sr. Louisiana based sovereign wealth funds, with 90% of sovereign wealth funds Education Quality Trust Fund is one such investor that does not based in the region investing in real estate. High proportions of real invest in the asset class due to state laws restricting its investments estate investors are also found in Asia (76%) and the MENA region to only equities and fi xed income. (65%), likely due to the sizeable assets managed by many of the sovereign wealth funds in these two areas providing the requisite As shown in Fig. 3, the majority of sovereign wealth funds are capital to engage in a diversifi ed global real estate program. under-allocated to the asset class. While 77% of sovereign wealth funds currently allocate up to 9.9% of their total assets to real However, sovereign wealth funds based in sub-Saharan Africa and estate, 93% have a target allocation of between 5% and 14.9%, Europe are less likely to invest in the asset class. Furthermore, none indicating the potential for infl ows to the asset class as sovereign of the sovereign wealth funds based in Latin America invest in the wealth funds move closer to their strategic targets. However, one of asset class. The majority of these Latin America-based investors the largest allocators to real estate, as a proportion of total assets, are stabilization funds that require liquid portfolios; therefore, real is Alberta Heritage Savings Trust Fund, which currently allocates estate investment does not fi t this criterion.