The Next Alternative: Real Estate Asset Class Summary

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  • 1. ALTERNATIVES State Street 2013 Alternative Fund Manager Survey Executive Summary: Real Estate September 2013
  • 2. 22 ALTERNATIVES State Street 2013 Alternative Fund Manager Study • In July 2013, State Street conducted a survey of 391 leading alternative asset managers in collaboration with Preqin, a leading source of data and intelligence for the alternative fund industry. Of these, 57 were from the real estate sector. • Managers provided their insights on current challenges, priorities and opportunities across the industry, as well as their predictions for the future. About the Research 2 54% 30% 14% 2% Real Estate Respondents by Location North America Europe Asia Pacific Other
  • 3. 33 ALTERNATIVES Drivers of Change Real estate managers view investors’ demands for increased transparency and greater control of assets as the greatest drivers of change in the industry today. Source: State Street 2013 Alternative Fund Manager Survey 51% 40% 35% 32% 30% 0% 10% 20% 30% 40% 50% 60% Investor demand for greater transparency around risk and performance Investor demand for greater control of assets Increased manager competition for limited pool of assets Investor demand for more favorable fees Investor demand for greater liquidity at fund level Top Five Drivers of Change in the Real Estate Sector Note: Respondents could select up to three answers. Only the top five responses are shown.
  • 4. 44 ALTERNATIVES Evolving Strategies Create Competitive Edge Real estate managers are poised to expand their business over the next five years by adding investment strategies and expanding into new regions. 35% 30% 26% 26% 16% 11% 7% 25% 14% 16% 33% 32% 9% 12% Enter joint ventures with investors Change fee structure Offer managed accounts Add new investment strategies with in-house resources Expand into new regions Offer funds with shorter lifespans Add new investment strategies by acquiring another business Product and Investment Changes Made by Real Estate Managers Since 2008 or Planned by 2018 Introduced this change since 2008 Plan to introduce this change over next five years Source: State Street 2013 Alternative Fund Manager Survey
  • 5. 55 ALTERNATIVES Operational Excellence With a Spotlight on Risk Real estate managers have reached a place of relative stability after having made major operational and risk changes in the wake of the financial crisis. 51% 51% 42% 19% 16% 11% 18% 9% 14% 14% Reduce amount of leverage we employ Report more information to investors on holdings, risk and performance Report more frequently to investors on our investment holdings Purchase or license software to upgrade investment ops technology Use new techniques to assess performance & risk relative to peers Risk and Operational Changes Made by Real Estate Managers Since 2008 or Planned by 2018 Introduced this change since 2008 Plan to introduce this change over next five years Source: State Street 2013 Alternative Fund Manager Survey
  • 6. 66 ALTERNATIVES Challenges for the Future Fundraising is the top concern for real estate managers as they face fierce competition for investor capital. Source: State Street 2013 Alternative Fund Manager Survey 82% 54% 38% 20% 18% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Fundraising Generating performance Adapting to regulation Preserving margins Fulfilling investor demands Top Five Challenges Predicted by Real Estate Managers Over Next Five Years CORP-0853