The strong trend towards club deals and joint ventures in real estate investment will reverse to a certain extent, Matthias Thomas, chief executive at INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, told members of the press in Frankfurt.
Many institutions have chosen this form of investment in recent years because βthey wanted to get more control over the products they had allocated money toβ, he said.
βBut if you want to have influence and control over the investment,β he added, βthen you need HR resources, as well as market knowledge.β
He said many smaller institutions were looking into club deals and joint ventures and βtrying it outβ, but he questioned whether they would continue to invest in these vehicles.
However, Thomas acknowledged that club deals and joint ventures were an βestablished way of investingβ and said larger institutions such as major Versorgungswerke had βdefinitelyβ established the necessary know-how for such vehicles.
According to INREVβs 2014 investment intention survey, the trend towards joint ventures and club deals continues, but βinterest levels have now passed their peakβ.
Nearly 40% of investors in Europe expect to increase allocations to these investment vehicles compared with almost 50% in 2013 and well over 65% in 2011.
βLarger investors are looking at club deals and joint ventures, while smaller investors remain committed to funds,β INREV noted in a report on the survey.
Thomas said the reason for investors wanting more control in real estate vehicles was a βcertain level of disappointment with managers and co-investorsβ during the financial crisis.
βOne problem was the style drift β i.e. you think you invest in core, but, over time, the fund drifts towards value-add,β he said.
However, he added that, for him, βcoreβ can only ever exist at a certain point in time, as any real estate asset goes through different risk stages during its lifetime.
βSo, in fact, βcoreβ can only ever be established on a fund level, never for a single asset,β he said.
