1st time funds struggle more post-Covid; 2022 annual meeting plans

NAREIM Capital Raising & IR meeting 

November 30-December 1, 2021

Key takeaways



First-time funds represented more than a third of funds in market in 2021 – but it was mature managers who collected almost all the capital.


During the NAREIM Capital Raising & IR meeting this week, members heard from leading industry veterans on the outlook for capital raising post-Covid. They all agreed that emerging managers, but particularly first-time funds, face a difficult task in securing capital from institutional investors, who are increasingly preferring re-ups over first-time allocations.


The barriers to entry facing emerging managers are nothing new to real estate investment managers, however post-Covid, that challenge appears even greater. According to one presentation, in 2021, first time funds represented almost 150 of the more than 300 value-add and opportunistic funds in market. 


However, the amount of capital they were awarded year-to-date was minimal – and one of the lowest levels recorded since 2003.


Key capital raising highlights in 2021, discussed at the meeting, include:


  • Through H1 2021, $22.9bn of capital was raised by US real estate fund managers, three-quarters of them value-add and opportunistic. Around a third of all capital raised in H1 2021 was by the top 5 managers, but 41 distinct managers have raised at least $60m of capital in H1.

  • The average fund size YTD in 2021 is $546m; the median fund size is $521m.

  • The NAREIM Capital Raising & IR meeting, through a mix of presentations, whole room discussion and breakout groups, discussed investor appetite and allocations post-Covid, how to underwrite climate risk, DEI, ESG into deals and performance, as well as reviewing plans for 2022 annual investor meetings.


Data presentations from GCM Grosvenor, Hodes Weill & Associates and Preqin can be accessed here.


The NAREIM Capital Raising & IR meeting also held a special MasterChef cooking competition between two investors and one manager.


Cooking in their own kitchens, under the guidance of former Masterchef contestant Chef Michael Silverstein, Judy McMahan of UPS Pension Investments, Michael Leifeste of Texas Treasury Safekeeping Trust Company and Kathy Briscoe of Dermody Properties battled it out to produce the best – and fastest – chicken satay to go before the judges (the meeting attendees).


In 15-mins, with smoke alarms ringing, wine being consumed and no cheating whatsoever, the winner was revealed: Michael Leifeste of Texas Treasury.


Advising that smoke alarms should be going off when you’re pan frying meat, Masterchef Michael Silverstein said: “That’s what makes cooking so much fun – getting out of your comfort zone, trying new recipes, pushing yourself.”


He urged everyone attending the meeting to, “take some risks. You’ll have some fun in doing that.” NAREIM has another 15 copies of Chef Silverstein’s book, New Keto Cooking, available for free. Anyone who would like a copy should email Zoe Hughes with their address. Books will be sent on a first-come-first-served basis.


Other key highlights from the meeting, included:


  • Annual meetings: Hybrid, in-person only or virtual-only in 2022? 

  • Plans for spring in-person only meetings were being put on hold temporarily while managers learned more about the impact of the Omicron Covid variant on investor travel plans, according to member feedback following one breakout group session.

  • As managers decided how to tackle spring 2022 annual meetings, one member said investors will demand hybrid going forward. The challenge, the group said, therefore was how to cater the experiences of those attending in-person against those virtually.

  • One member said they were rotating between in-person and virtual meetings, so one year is virtual, one year is in-person – to provide a balance between the different needs of investors.

  • Institutional investors are increasingly looking to JV partnerships with operating partners compared to backing first-time fund launches. “It provides more access to great teams out there,” said one attendee, adding that it was a better model for getting the business going, noting that a fund management business could grow from that. “A lot of investors are trying to go as direct as possible,” they added.

  • Investors have a lot of capital/liquidity in the market currently, and that is only set to increase with target allocations to private real estate expected to rise even more over the next few years. A significant portion of that capital is leaning towards value-add and opportunistic strategies at the expense of core real estate.

  • There’s no longer a time when you’re not marketing/soft marketing. Members asked how long the time was between fund vintages, with a majority of members agreeing that the best time to market was when you didn’t have anything to sell. Many firms are now preparing existing investors of future fund launches, with pre-marketing often taking place 12 months before a fund officially launches. One attendee added: “The best time to market is when you’re not in the market. Have reasons to connect with investors and make it personal.”


Download the presentations:

Data presentations from GCM Grosvenor, Hodes Weill & Associates and Preqin, and the meeting attendee list, can be accessed here.