Wealthy private individuals are becoming a force to be reckoned with in the global real estate arena, Tilman Hickl, head of real estate customised mandates at UBS Asset Management, said during an address on new sources of capital at the Inrev annual conference in Berlin.
Between 1995-2015, the number of billionaires worldwide increased to 1,397 while the volume of their wealth more than trebled to $7 tln during this 20-year period, he noted. While the US and China lead the pack worldwide, Germany is the third largest source of private wealth, Hickl said.
A significant number of the world's billionaires spend more money on real estate than any other asset class, with real estate accounting for a hefty 15% on average. This is more than double the figure for most institutional investors.
Of this figure, residential accounts for just under half - or 44% - while commercial accounts for the remaining 56%. Of the total, only 13% is spent on international properties. In 2015, European real estate outperformed other asset classes with a return of 8.7%.
Good news for fund managers
'Billionaires like real estate because it is stable and resilient,' Hickl said. Moreover, a significant number – or 42% - are seeking to increase their real estate allocations, he added. 'This is good news for fund managers, but it’s less good news for investors.'
Billionaires have three main areas of interest, Hickl said, pointing to internationally diversified funds; high-yielding opportunity funds; and separate mandates.
Turning to how wealthy private investors behaved, Hickl pointed out that they generally had fewer bureaucratic hurdles to jump than an institutional investor and could therefore react very fast when they saw an opportunity that they liked. 'Private investors are often entrepreneurial and have very good reflexes. They're clever and they learn fast…that’s the reason they're rich.'
There is good reason for institutional investors to fear wealthy private investors, Hickl said. 'They're simply quicker. They create additional competition in an already dried-out market and that is also keeping yields down. They often outbid their competitors for properties that they like because they don’t need very high yields.'
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NEW EVENT
Real Estate Private Equity
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UBS Asset Management - Atrium, 7th Floor, 5 Broadgate,
London, EC2M 2QS, United Kingdom | 26 April, 08:00 - 11:00
For the first time, PropertyEU has organised a private equity real estate event examining the European market.
Hear from Ric Lewis, Chief Executive and Chairman of Tristan Capital Partners, as he delivers a TED-style talk followed by an interview on the realities of investing in 2017.
Joining him are Thomas Wels, Head of Real Estate and Private Markets at UBS Asset Management, plus two prominent investor-consultants: Paul Richards, Head of European Real Estate at Mercer and Paul Jayasingha of Willis Towers Watson.
Robin Marriott, editor of PropertyEU's CapitalWatch, is moderating the event.
Highlights include:
- What the top private real estate firms are doing
- Which strategies investors/limited partners are keen on
- How the competitive landscape is shaping up
- Who are the emerging managers to watch?
- Insights into the fund management industry
Attendance is free but places are strictly limited. Please register here to book your place
