Open ended funds in a rising rate environment…
As liquidity dries up and redemptions increase across the board, what does the future of open ended funds look like? How does a fund position itself to weather the coming storm?
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Open ended funds are generally low leverage income funds that invest in core/core plus and are focused on paying out stable, relatively low yield distributions similar to a REIT. They tend to gravitate towards fixed rate financing. Most investors aren't pulling their money from this type of investment, so solid open ended funds should do fine.
Don't see a lot of new ones opening their doors in the next few years, but those that are established won't be going anywhere.
A colleague at JPM told me they are seeing a lot of redemption requests. Anecdotal, but many institutional investors in this space need to "rebalance" their portfolios since their allocations are all screwed up. That includes pulling money out of RE.
Second. Two of our big LPs (Carlyle/KKR/BX & MS/GS/JPM) are seeing redemptions in core open ended funds per discussions with their teams over the past few weeks
Pressing pause on basically everything new so money available for when pricing stabilizes and liquidity returns. Don’t think open end structure you’re at a material disadvantage vs any other player and there are some actual nice pros…but let’s be honest, the whole RE industry is pretty screwed right now
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