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Blackstone remains global king of property funds

Real estate has become a critically important asset class for many investment managers with property assets under management worldwide reaching a record €2.7tn at the end of 2017 after almost doubling in size over the past four years. Blackstone tightened its grip on its crown as the world’s largest real estate manager in 2017 after the value of its property assets under management surged almost 29 per cent to €184bn.

The rapid growth for Blackstone’s property arm helped the New York-listed manager consolidate its lead over Brookfield which held the top rank as recently as 2015, according to Inrev, the European association that represents investors in non-listed real estate vehicles. Real estate assets managed by Toronto-based Brookfield rose 5.3 per cent to just under €141bn in 2016. PGIM, the investment arm of the US insurer Prudential Financial, retained third spot with property assets of nearly $122bn, a 5.3 per cent annual increase.

Two other managers, Hines and TH Real Estate, an arm of Nuveen Investments, also saw their property assets pass the $100bn milestone for the first time. Investors have ploughed more than €500bn in new money into real estate over the past five years in spite of mounting evidence that property managers are finding it increasingly challenging to identify suitable opportunities to deploy capital.

The pace of fundraising picked up in 2017 with non-listed real estate vehicles attracting €152bn of new capital last year, an increase of 25 per cent on the previous year. This is an underestimate as capturing all fundraising activity remains challenging. But the vast scale of fundraising, coupled with rising property values, is fuelling concerns that unsustainable pricing bubbles have developed in some real estate markets and future returns could disappoint investors.

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