Please tell me if you think my thoughts here are wrong - smaller repe funds have a short life span going forward
Currently at a LP repe fund, not huge but not small. The more I think about the operations of this side of the business the more I question why capitol allocators would give us money rather than toss an extra 25-50 million dollar allocation to Starwood or blackstone or the like. On top of this, it appears that true alpha generation is getting more difficult and more rare and largely coming from GPs.
With this in mind is the future of value creation and alpha generation in real estate at the GP and development side? Would staying on the LP side just be staying in a quickly consolidating and, some might say, dying side of the business?
I guess the root of the question comes down to am I actually creating value and at what point will allocators cut out the smaller repe funds and go direct to developers/GPs and just up allocations to the mega repe funds to do the big corporate m&a takedowns and core strategies?
You have a lot of questions there, so just some random points....
1. Many LPs are going direct to owner operators, but still keep a RE investment mngr in for limited services (modified SMA), that will grow. And more and more big investors (like mega pension funds) are developing teams and resources for direct investing. That is a trend, and fee compression in the fund mngt space is/will happen.
2. LPs also have rules on diversification and concentration, so they will want to put money with many managers and not just send all to BX/SW. Plus, those BX type funds get oversubscribed quite often these days, so they probably cannot put all the money they would want to with them if they tried.
3. There is probably always a place for smaller funds, more and more money is being allocated to real estate. But it won't always be pure institutional, eventually more money will come from individuals (via IRAs/401ks/403b), this is what happens when fewer and fewer of us have pensions.
4. Are you creating value? I don't know are you? Real estate is very "fractured" as an asset class (i.e., can't just key tickers into Bloomberg and trade), so probably space for lots of players, and lots of room between "m&a takedown" and "core", but again, you have to define your value prop.
Quam et sit nam ea et aperiam totam. Sapiente voluptas sunt dolores minus excepturi et tempore.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...