RE Arm of Hedge Fund? Solving for Broad Investment Mandate
Wanted to bring this back up from prior threads to get a sense ofwhat the landscape looks like today for these types of opportunities. Would appreciate some real insights into what the scope of work looks like for people sitting in these seats.
What’s the split between asset level investing, portfolio/platform buyouts, public debt/equity investing…
Ultimately solving for what opportunities outside of a REGAL IB seat that would have the broadest mandate and see most diverse set of investment opportunities.
Based on the most helpful WSO content, the real estate (RE) arm of a hedge fund typically operates with a broad investment mandate, offering exposure to a diverse range of opportunities. Here's a breakdown of what the scope of work and investment focus might look like for professionals in these roles:
1. Asset-Level Investing
2. Portfolio/Platform Buyouts
3. Public Debt/Equity Investing
4. Broad Mandate Opportunities
5. Comparison to REGAL IB
6. Key Skills and Insights
If you're solving for the broadest mandate and the most diverse set of opportunities, targeting a hedge fund with a flexible, opportunistic real estate strategy would likely align with your goals. These roles provide exposure to a mix of asset-level work, portfolio management, and public market investing, offering a well-rounded experience in the real estate investment space.
Sources: https://www.wallstreetoasis.com/forums/the-only-post-about-active-investing-you-will-ever-need-to-read?customgpt=1, Credit Hedge Fund opportunities, Is there a future for non-quant hedge funds?, AM vs HF: The Business of Our Business, Long term, concentrated, deep fundamental investing
Generally speaking, it's a very rare case that the same seat investing private also invests public. I would also say that if you want to be thinking about the assets, REGLL isn't great.
Most HFs invest in REITs to an extent, and some have a REIT pod or MBS pod but I'd say a more common situation is just for the Fins pod or analyst to cover the sector like at a standard LO. These are shorter-term players, long-term money sits with the big REIT LO shops like Cohen & Steers or products of LaSalle, CBRE, Heitman, AEW. There do exist public RE-specific HFs but they're rare (Long Pond, Land & Buildings [activist]). It's been a tough go for bond proxies in recent years given rates movement - REITs are the worst-performing GICS sector L3Y / L5Y and the FNER/RMZ have basically traded sideways since mid '22.
To the extent that an HF invests in private RE out of the main fund, it's highly opportunistic, deal-by-deal, and fits kind of a ballast/Sharpe-booster role. The nature of this is that they don't really take large positions and therefore cannot fit a privatization even with coinvest. In other words, for platform deals & take-privates you need the fund size of a megafund (Brookfield, BX) to maintain sufficient diversification within the fund. The MFs often can take public positions in a fund and sometimes do. There are HFs that have RE-only fund series (Farallon, Two Sigma) but IMO this is just standard REPE just without the resources & checkbook of a MF.
this. the only hf i can think of where juniors are generalists across private/public, equity/debt is baupost. at least the position was a few years ago. think they've been trimming real estate exposure. hence why they laid off 20% of the equities / real estate investment teams in 2024. everywhere else i can think of is more siloed.
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