What do endowments invest in RE wise?
Having coffee with someone who handles RE at an endowment. Met a lot of people in the PE space, but never someone who works at an endowment. Is it more low risk/credit sort of investments, or do they do opportunistic investments also? Do they invest directly into deals or normally fund based?
Most Endowments are very similar to life companies in their risk profile for real estate. Obviously some endowments will need to be more opportunistic with their investments if they are behind or have higher targets. But generally, the small - mid size ones are investing in funds and not one off deals. The bigger ones with their own real estate arms you will see investing in direct assets with their own real estate divisions along with funds themselves. Some of the larger ones typically have their own operating arms as well.
Harvard for example, due to its size partially, has to diversify quite a bit, and I know they have been buying up quite a lot vineyards over the last decade. So i guess my point is, its all over the place, but generally they like newer cash flowing assets that they dont have to worry too much about from an operating perspective.
No experience working with them but I recruited for a number back in the day. The smaller to mid sized ones didn’t have the staff or expertise to take on direct ownership and were looking for fund level exposure. Can’t speak for the larger endowments.
We just landed a major endowment for our current fundraise. We are all the way to the right on peak opportunistic / risk profile and returns. To be fair, I was quite surprised as most of them seem to fall more into the conservative bucket per poster above. They mostly allocate to funds via the Fund of Funds model, but some occasionally do direct or co-invest if they are large enough and have dedicated real estate staff internally to do so.
One thing I can say for sure is the following - their investing culture is largely driven by CYA motives. What I mean by that is you can have the most attractive thesis, team, returns etc, but you are still likely to lose out to BREP Fund XVXVX with half the return expectations because NO ONE will get in trouble for investing in BREP and having them underperform. However someone will have to fall on the knife if they drive through the investment in New Fund XYZ and it for any reason underperforms. Alas, this is just way the world goes round whether it makes sense or not.
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