1) Q2 2015 Fundraising Update
Pension fund commitments to managed real estate vehicles
2) Strong commitment activity continues in 2015
Domestic public pensions have committed $24.4 billion to managed
real estate vehicles thus far in 2015, a 46 percent increase over 2014
Commitments to real estate managers by U.S.-based
public pensions through the first half of 2015 are up
significantly over the same period in 2014, demonstrating
institutional investors’ continued search for yield in this
low interest rate environment. Per FPL Consulting’s
proprietary database, pensions committed $24.4 billion to
managed real estate vehicles through Q2, compared to
$16.7 billion over the same period last year and $14.3
billion in H1 2013. The degree of the increase over 2014
is partially attributable to recent closes by several large
opportunity funds, most notably Blackstone’s ~$15B
BREP VIII which closed earlier this year.
Investment Strategy and Vehicle Structure
High-yield (i.e. value-add and opportunistic) strategies
continue to be in favor with investors in 2015, making up
79 percent of commitment volume YTD. This emphasis on
higher yielding strategies is at least partially driven by the
fact that rising asset prices and competition for deals have
made it more challenging for investors to meet target
returns with core strategies. Instead, many are showing a
greater willingness to take on higher levels of risk for the
potential of higher returns. That said, it’s important to
note that the degree of the weighting toward
opportunistic strategies is partially driven by BREP VIII,
as is the weighting to closed-end funds (see below).
As with investment strategy, the landscape of
commitments by vehicle type shifted in the first half.
While closed-end commingled funds were popular in
2014, they have been even more so thus far in 2015,
representing 59 percent of commitment dollars YTD in
2015, versus 47 percent in 2014.
Commitments to real estate managers
(thru Q2)
Q1
24.4 $B
Q2
14.3
8.4
16.7
8.4
5.9
2013
© 2015, FPL Consulting
12.0
8.2
2014
2015
Commitments by investment strategy
%
37
33
28
29
34
38
2013
2014
54
25
Core
Value-add
21
2015 YTD
Opportunistic
Commitments by vehicle type
%
25
42
18
29
12
10
56
47
2013
Dedicated debt vehicles have accounted for 9 percent of
commitment volume YTD, while 5 percent has gone to
“other” funds (e.g. REIT securities, fund of funds, etc.).
12.4
2014
Closed-end
commingled
Open-end
commingled
59
2015 YTD
Separate
account
3) Property Type
Vehicles dedicated to a single property type have attracted
22 percent of commitment dollars so far in 2015, down
from 41 percent in 2014 but in line with 2013. Multifamily
has been the most common among these property-specific
vehicles, driven by large separate account commitments to
TGM and Camden, as well as actively marketed funds
sponsored by Waterton, Covenant, Abacus, and others.
“Other” (i.e. niche) property types including senior housing,
student housing, storage facilities, medical offices, and
others also garnered attention from investors.
Breakdown of commitments by property type
(among property-specific vehicles)
2015
YTD
2014
40
25
8
16
16 2
20
28
Multifamily
Industrial
Office
%
34
12
Other
Retail
Geography
Breakdown of commitments by geography
%
8
12
6
8
14
37
23
56
2013
72
2014
North America
Europe
Global
56
2015 YTD
Latin America
The majority of commitment capital (56%) continues to flow
to vehicles focused on North America. That said, broad
mandated global strategies have attracted a much greater
proportion of commitments in 2015—37 percent versus just
14 percent in full year 2014. This finding is again influenced
by the recent closing of several large opportunity funds, but it
will be interesting to see how investors’ preferences with
respect to geography progresses through the remainder of
the year. It is also worth noting that commitments to Europe
and Asia focused vehicles have dropped materially over the
past two years, from 20 percent (combined) in 2013 to just 8
percent YTD.
Asia
Average Commitment Size
The average commitment size thus far in 2015 is $94
million, highly consistent with that of 2014. As one would
expect, the average commitment to separate accounts is
considerably higher at $164 million. It’s important to note
that this metric includes both newly formed separate
accounts (which tend to be larger commitments), as well
as follow-on commitments to existing separate account
vehicles (which are often smaller).
© 2015, FPL Consulting
Average commitment size
(overall and by vehicle type)
$mm
Overall
Closed-end funds
Open-end funds
Separate accounts
164
94
82
80
4) Manager Concentration
The commercial real estate industry’s prominent players
continue to attract a disproportionate share of commitment
volume, underscoring the bifurcation between ‘haves’ and
‘have nots’. The top 5 firms (by aggregate fundraising dollars
over the period) represent 40 percent of volume YTD, while
the top 20 represent 68 percent. That said, it is important to
keep in mind that these concentration metrics tend to decline
over the course of the year. For reference, in Q1 of this year,
the top 5 firms accounted for 48 percent of commitment
dollars and the top 20 firms made up 81 percent of total
commitments.
Concentration of commitments
%
All others
All others
All others
All others
48
32
48
Firms 11-20
Firms 11-20
Firms 6-10
18
15
13
Firms 6-10
13
Top 5 firms
Top 5 firms
40
21
2014
2015 YTD
Vertical Integration
Commitments to vertically integrated managers
(as % of total commitments)
%
26
11
11
15
6
5
2014
2015 YTD
Commingled funds
JV/Separate accounts
Contact
For more information, please contact:
Timothy Kessler
Principal
tkessler@fplassociates.com
© 2015, FPL Consulting
Vertically integrated managers have received 11 percent
of commitment dollars in 2015, compared to 26 percent
through full-year 2014. It is worth noting, however, that
this figure is considerably higher when limited to valueadd strategies—23 percent of capital committed to
vehicles employing value-add strategies went to
vertically integrated managers. This is more in line with
full-year 2014, where 30% of value-add commitment
dollars went to vehicles sponsored by vertically
integrated managers.
5) FPL ADVISORY GROUP
FERGUSON PARTNERS
FPL ASSOCIATES
FPL CONSULTING
Executive Search
Compensation
Management Consulting
Chairmen/
Chief Executive Officers/
Presidents
Benchmarking
Strategic Planning
Program Design
Organizational Design
Contractual & Policy
Arrangements
Corporate Finance
Board of Directors/Trustees
Senior Management/
Corporate Infrastructure
Ferguson Partners
Surveys
FPL Associates
Succession Planning & Leadership
Specialized Research
FPL Consulting
About FPL Advisory Group
FPL Advisory Group (“FPL”) is a global professional services firm that specializes in providing executive search, compensation, and
management consulting solutions to a select group of related industries. Our committed senior partners bring a wealth of expertise
and category-specific knowledge to leaders across the real estate, hospitality and leisure, and healthcare sectors.
FPL is comprised of three primary operating companies that work together to serve a common client base. Ferguson Partners
Ltd. provides executive and director recruitment, succession planning, and board assessment services, FPL Associates provides
compensation consulting services, and FPL Consulting provides a range of organizational, financial and strategic consulting services.
FPL is headquartered in Chicago, with offices in New York, London, Hong Kong, San Francisco, Singapore, Tokyo, and Toronto.
From Chicago, Hong Kong, London, New York, San Francisco, Singapore, Tokyo, and Toronto, we serve clients across the globe.
Our Industry Practices
FPL serves clients in a select group of related sectors:
Real Estate
Investment Managers, Public & Private Owners/Developers, Service Firms, Commercial Mortgage Investment/Finance,
Residential Mortgage Investment/Finance, Homebuilders, Engineering/Construction/Infrastructure
Hospitality & Leisure
Lodging, Gaming Resorts & Casinos, Restaurants & Cafes, Sports & Recreation, Amusement Parks & Attractions
Healthcare
Healthcare Services Firms, Seniors Housing and Skilled Nursing Owners/Operators, Hospitals, Non-Profit, Faith-Based, Clinic Based,
and For-Profit Healthcare Systems, Academic Medical Centers, Managed Care Companies, Healthcare Management Consulting,
Business and Technology and Start-up Companies
CHICAGO HONG KONG LONDON NEW YORK SAN FRANCISCO SINGAPORE TOKYO TORONTO
www.fpladvisorygroup.com
The Ferguson Partners recruitment practice consists of five affiliated entities serving FPL’s clients around the world: Ferguson Partners Ltd. headquartered in Chicago with other locations in New York and San Francisco, Ferguson
Partners Canada Co. in Toronto, Ferguson Partners Europe Ltd. headquartered in London with a Japan branch located in Tokyo, Ferguson Partners Hong Kong Ltd. in Hong Kong, and Ferguson Partners Singapore Pte. Ltd. in
Singapore. Ferguson Partners Europe Ltd. is registered in England and Wales, No. 4232444, Registered Office: 100 New Bridge Street, London, EC4V 6JA. Ferguson Partners Singapore Pte. Ltd. is registered in Singapore, Business
Registration No. (UEN) 201215619H, Employment Agency License No. 12S6233. FPL Associates L.P., the entity which provides consulting services to FPL’s clients, is headquartered in Chicago.