Hedge Funds With Real Estate Arms

I've been seeing more and more hedge funds open up a real estate arm. By this, I mean actually buying up real estate as equity investors, going into asset backed securities like cmbs, rmbs, mezz debt, etc., or real estate focused public equity investments. A good example would be Two Sigma, a firm known for a quant strategy going into RE (yes I know they are going multi-asset now but RE seems to be new). Same with Baupost and the likes, but they've had RE for a while.

I'm joining a MF REPE shop this year and have a few questions.

1) Do you think more funds will continue to grow into this, with interest rates being low and the fees getting lowered?

2) What would pay be like for a junior doing real estate at one of these funds? Would it be higher than MF pay? Junior as in MF Associate (think somewhere of $250-$350k)

3) All of my experience is in RE and I'm joining a MF in the RE group. From what I've been told, they will do asset, portfolio, and company acquisitions. So it seems like the three statement modelling experience would be there too.
 

If I'm considering going into the hedge fund space later on, would my best bet be to go into a RE group and then work into the public equities group?

Or would you suggest trying to go into the PE/ credit group at my MF if I want to go into HFs? 

Or do you think a MF name is good no matter the asset class in order to get looked at by top headhunters and fund managers. Just continue to read investment books, research companies on your own time, and have a few pitches prepared?

Not sure how recruiting for HFs work, anything would be great. Thanks!

 

There’s a number of hedge funds with not only illiquid focused real estate arms (ie properties/portfolios/real estate platforms) but there are a number that have liquid real estate strategies focusing on the REITs and real estate related securities (hotel management companies, publicly traded brokerages, real estate services, etc). I would search around as this has been discussed in the RE forum…search around for “real estate hedge funds” or something along those lines.

 

I used to work at Angelo Gordon. Everybody's pay situation is different, but at least in my case, I thought they paid very well.  When I eventually decided I was ready to leave, my resume is good enough I got interviews easily and even offers too; but it took two years before I found someone willing to match what Angelo was paying. 

 

1. Davidson Kempner & King Street are both very strong in the space, SVP also making big pushes into real estate they hired a new head in the US and Europe 

2. Baupost weren't making enough £/doing enough volume, Seth gutted the team 

 
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Lol everyone keeps listing all of these names like Scultpor, Baupost, King Street, etc. Their real estate investment arms are basically indistinguishable from traditional REPE platforms that do both debt and equity investments. I’ve shown them deals as an investment banker and they’ve been competitors on deals I’ve worked on in REPE where my team is… financing the development of an office building… acquiring a hotel… providing JV Equity for a multifamily development… it’s not necessarily sophisticated hedge fund stuff.

Truly, the only difference is that their parent company is a well known hedge fund.

I went to market on a few entity level investments during my days as an investment banker - the most interested parties on those deals were always Almanac Realty, KKR, Stepstone, Heitman, etc. Basically just regular REPE funds.

Groups notably not interested? Sculptor, King Street, Baupost. It doesn’t matter if your parent company is a hedge fund - all that matters is if your fund mandate allows for it.

Sure, some hedge fund groups such as Monarch Alternative capital and Davidson Kempner will do entity level deals, but it’s irrelevant that they’re housed in a hedge fund. Almanac, KKR and Stepstone are probably bidding on the same deals.

Also, I work in the real estate arm of a hedge fund not listed here. The true hedge fund-type investments into public REITs, SASBs, etc are covered by the hedge fund guys - not the real estate team. Of course they loop us in and we provide our opinion on the real estate, but the hedge fund team is still the transaction lead. And sometimes we’ll originate a mezz / pref investment and place part of it into the hedge fund. But the actual work of originating and underwriting the loan is indistinguishable from what someone at Related or PCCP is doing.

Anyways, rant over. You don’t realize how uninformed some posters on WSO are until they start posting about exactly what you do

Edit: actually I’m gonna keep going. There are real estate hedge funds out there that buy public REITs. But it will be a true public equity role and nothing like what Sculptor and Baupost do. Also, the universe of public REITs is pretty tiny compared to a space like Healthcare or Tech or something. Tough to build a big AUM, which is ultimately what you need to make money. Most of the public equity reit investors are housed at big Long Onlys.

 

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