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Investments

Endowment plans find real estate assets attractive

January 25, 2013

With improving market conditions, many institutions in private real estate funds are likely to become active in the market once again, spelling good news for the housing market. 

Forena Akthar at Preqin, which monitors private equity and real estate markets, noted the company’s real estate online database is tracking 339 endowments planning to invest in the real estate asset class, which represents an impressive 10% of the global real estate investor realm.

Endowment plans allocate 8% of their overall investments to real estate and have an average target allocation of 9%. Of the endowment plans active in the real estate market, 90% invest in private real estate funds.

"Prior to the financial downturn, these institutions had been small but frequent investors in the private real estate fund industry," Akthar said. "However, economic uncertainty led to many putting a hold on their investments." 

However, these institutions have an increasing hunger for endowment plans once again.  

About 64% of endowment plans invest in value added funds and 61% have a preference for resourceful funds.

"These are the fund types that endowment plans are likely to commit to as they become more active in the market," Akthar noted.

With 57% of endowment plans active in real estate having total assets of less than $500 million, its not surprising that these vehicles attract such a prominent amount of endowments.

In regards to demographics, about 77% of endowment plans allocated to property are interested in investing North American real estate markets.

Of the endowments looking to make new real estate fund commitments in the next year, about 75% indicated that they would invest in North America  — a strong indicator that consumer confidence in housing continues to gain momentum. 

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