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Laxman Pai, Opalesque Asia: Preqin forecasts that private real estate assets under management (AUM) will grow from $1.05tn in 2020 to $1.24tn in 2025.
While lower than Preqin's CAGR forecast of 9.8% for all alternative AUM, the real estate AUM growth of 3.4% per year should be viewed in the context of a market hit by what will likely be a period of demand uncertainty for its two largest asset classes: retail and offices.
Despite this, demand for real estate assets persists. Public and private pension funds have been consistently increasing their allocations to real estate over the past decade. Average allocations have risen from 7.0% in 2010 to 9.2% in 2019 for public funds and 6.2% to 7.1% for corporate pension funds.
Family offices too have increased exposure, from 8% to 13% over the same period. Insurance companies, banks, government agencies, and foundations have been cutting back their allocations, while allocations at asset managers, endowment plans, sovereign wealth funds, superannuation schemes, and wealth managers have remained stable.
"Investors seeking yield will turn further toward real estate assets, while funds promising higher returns will be pushed up the risk curve," said Dave Lowery, Head of Research Insights, Preqin.
Investors are likely to continue turning to real estate to provide yield they cannot secure from their fixed-income portfolio, said the report.
Over the next few years, bond-like real estate investments may expe...................... To view our full article Click here
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