Investors Pile into Real Assets as Record Numbers Seek Funding

Real assets funds raised the highest amount of quarterly capital in nearly two years during the third three months of 2015, Preqin has reported.

The data firm found that $50.6 billion was raised by unlisted infrastructure and real estate funds between July and September, the highest aggregate since the fourth quarter of 2013. Infrastructure funds closing during Q3 2015 raised $13.1 billion, while real estate vehicles raised $37.5 billion.

In the same time frame, world equity markets saw significant volatility and a much anticipated US rate rise was postponed by the Federal Reserve.

In their quest for relatively stable assets, investors were particularly focused on “opportunistic” real estate funds, said Andrew Moylan, head of real assets at Preqin. This type of assets funds accounted for more than half of all the cash raised for real estate funds so far in 2015.

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“The first three quarters of 2015 have seen more capital raised for opportunistic real estate funds than in any full year since the global financial crisis,” Moylan said. “With concerns over pricing core assets, many institutional investors have moved up the risk curve in search of returns.”

Moylan added that fundraising was likely to remain strong in the next few months “with more mega-funds currently being marketed, and institutional investor appetite for opportunistic funds still high”.

“With a record number of funds being marketed, fundraising is very crowded and remains a long process for many, with the average firm taking over 18 months to reach a final close.”—Andrew Moylan, PreqinFor the past year, data has shown investors preferring bigger funds for real assets. In 2014, while the amount of capital raised by infrastructure and real estate managers remained broadly the same as 2013, the number of managers raising money fell dramatically as the larger players exerted their dominance.

The 160 infrastructure funds currently raising money from investors is the highest figure on Preqin’s records. They are chasing an aggregate $95 billion in funding.

However, these funds continue to face major challenges, according to Preqin’s Moylan: “With a record number of funds being marketed, fundraising is very crowded and remains a long process for many, with the average firm taking over 18 months to reach a final close.”

Moylan added that despite the asset class’ $115 billion in undeployed capital, “fund managers are facing more competition to put capital to work, and finding attractive assets at compelling pricing is a challenging prospect.”

There are 437 private real estate funds globally raising money from investors, seeking a collective $152 billion.

Across both asset classes, funds hold an aggregate $366 billion of capital still to be deployed, Preqin said.

Kirk Stebbins, formerly at the City of Austin Employees’ Retirement System, has been hired to fill the long-vacant position at the $13.7 billion fund.

Kirk StebbinsThe Oklahoma Teachers’ Retirement System (OTRS) has hired a CIO, filling a position left vacant for the last six years.

The $13.7 billion fund selected Kirk Stebbins, former CIO of the City of Austin Employees’ Retirement System, after a national search conducted by EFL & Associates.

The new investment chief started his position on September 28, Executive Director Tom Spencer confirmed. Stebbins is reporting directly to Spencer.

“Kirk Stebbins brings 16 years of experience as a CIO in the public and nonprofit sectors to OTRS,” the executive director said in a statement. “He has one of the finest analytical minds on investment issues I’ve ever seen, and his integrity is above reproach.”

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According to Spencer, Stebbins’ responsibilities include recommending changes in investment policy, monitoring compliance issues, and overseeing in-house investment managers, consultants, and fees.

He is also tasked with educating the board of trustees on investments, and conducting independent market research.

According to fund documents, Oklahoma Teachers’ gained 22.4% for the fiscal year 2014. The pension plan surpassed its benchmarks over the three- and five-year periods ending June 30, 2014, returning 13.6% and 16.1%, respectively.

Stebbins called the opportunity to lead Oklahoma Teachers’ “a professional challenge I could not pass up.”

Prior to spending seven years with Austin’s city pension, Stebbins served as CIO of the Oklahoma Public Employees’ Retirement System. He was also director of investments for the Boy Scouts of America and a consultant at Mercer.

The new CIO holds a master’s degree in finance from Texas A&M University and a bachelor’s degree from Louisiana Tech University.