Total worldwide real estate assets under management (AUM) reached €3.8trn in 2022, second only to the 2021 year-end record high of €4.1trn.

The Fund Manager Survey 2023, published by ANREV, INREV and NCREIF, highlights continued growth with the average AUM for each manager reaching €32.8bn at the end of 2022, up from €28.7bn in 2021.

The ongoing trend of high concentration among the globe’s largest fund managers was also confirmed, with 81% of this year’s total AUM (€3.1trn) concentrated within the top quartile by number of fund managers. The total AUM of the top 10 managers globally exceeded €1.8trn AUM, compared with €1.7trn a year earlier. This accounts for 47% of the total global AUM, up from 41% in 2021.

This trend can also be seen through merger and acquisition activities over the past years, the survey found. In 2022, approximately 15% of respondents were involved in mergers (18% in 2021). Furthermore, 22% were involved in acquisitions – a significant uptick from 12% in 2021. The trend is especially notable in Asia Pacific where 25% of respondents were involved in mergers in both 2021 and 2022, and 33% were involved in acquisitions in 2022, marking a threefold increase from the 11% reported for 2021. Europe is the only region where respondents were not involved in merger activities in 2022, however, this number increases to 20% when looking at acquisitions, which is on a par with the 2021 results.

The value of dry powder stood at €215bn, slightly up from the €214bn recorded the previous year. The latest results represent 7.9% of the total global fund manager AUM. Once again, most of the dry powder – €167bn – is concentrated in the hands of the largest fund managers in the upper quartile. In 2021, the equivalent value of dry powder amounted to €153bn.

Top 10 rankings shift, a little

The top three global fund managers remain as they were in 2021, though individual AUM has increased substantially. Blackstone leads the field (€475bn), followed by Brookfield Asset Management (€246bn) and Prologis (€183bn) in third position. Nuveen (€145bn) moved up from fifth to fourth place, while MetLife Investment (€138bn) claimed the fifth spot – replacing PGIM which moved to eighth position.

UBS and GLP – present in the top 10 global list in 2021 – gave way to new entrants, ESR (€133bn) in sixth position, and Starwood Capital (€110bn) in tenth place. CBRE Investment Management (€127bn) and AXA IM Alts (€120bn) came in at seventh and ninth place, respectively.

In Europe, there was no change in the top three fund managers, though the running order has shifted. AXA IM took the top spot with AUM of €90bn – a €7.5bn increase from 2021 – followed by Swiss Life (€89bn) in second position, and Blackstone (€88bn) in third place.

Europe’s three leading fund managers have a combined AUM of €266.9bn, almost on par with the remaining seven managers in the top 10 who account for a collective €321.3bn.

Having dropped out of the top 10 in 2021 CBRE re-entered the list in fourth place in 2022. The rest of the list consists of Deka Immobilien Investment (fifth), UBS (sixth), PATRIZIA (seventh), Credit Suisse Asset Management, (eighth), Syntrus Achmea Real Estate & Finance (ninth), and DWS (tenth).

North American strategies take poll position, but Asian capital grows in importance

In 2022, North American strategies overtook those focused on Europe, with Asia Pacific strategies in third position, followed closely by global strategies. They accounted for 39%, 30%, 17% and 14% of the total global real estate AUM, respectively. The combined total AUM of the North American top 10 – led by Blackstone – is the highest of all three regions, at just over €1trn.

Asia Pacific investors continued to expand their international presence, increasing their share in North America and Europe to 15.4% and 7.9%, respectively. ESR moving swiftly in the top 10 global fund managers is a clear example of this.

While Asia Pacific capital is gaining importance internationally, the Asia Pacific region is also attracting more international capital. The proportion of European and North American capital investing in Asia Pacific grew to 40.9%% at the 2022 year-end, significantly up on the 25.6% reported for 2021.

Pension funds and insurance companies remain main sources of capital

On a global scale, pension funds continue to account for the largest share of capital into non-listed real estate (40.9%). Insurance companies are the second most significant source of capital at 17.3% – though down from 19.3% at the end of 2021. Overall, sovereign wealth funds increased their global share of capital from 6.7% in 2021 to 9.4% in 2022, heavily influenced by Asia Pacific investors, according to the study. At 21.7%, they were the second largest source of capital into non-listed real estate for Asia Pacific strategies.

Core dominates

Core is the dominant strategy for all three regions, except for the global strategies where opportunistic strategies dominate. European and North American strategies are heavily focused on core. In Asia Pacific, there is more balance between core strategies and those with higher risk. Here, value-added and opportunistic allocations combined accounted for 41.3% at the end of 2022.

Most of the capital allocated to non-listed real estate funds is focused on open-ended vehicles, which goes hand in hand with allocations to core. Typically, the open end structure offers more diversification and a higher degree of liquidity. Open-end vehicles account for 80%, 60% and 40% of total capital allocated to non-listed real estate in North America, Europe and Asia Pacific, respectively.

Iryna Pylypchuk, INREV’s director of research and market information, said: ”The latest results reveal a moderate decline of total global real estate assets under management as falling values offset capital raising activity. At the same time, significant quantities of dry powder (€215bn) could trigger a quick turnaround in new capital deployment, but what stands out the most is the pull of capital towards the largest managers, which is even more evident than in the recent past. And the rise of corporate actions, especially acquisitions, is equally telling.

‘With the 2023 Capital Raising Survey highlighting the rise of Asia Pacific investors as the primary source of new capital for real estate globally – and ESR entering the global top 10 fund managers – it will be interesting to observe the extent to which Asia Pacific investors take advantage of opportunities currently available on the global playing field.”

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