Who will be the winners and losers of pre-covid funds?

Closing in the years just before the coronavirus pandemic will be less an indicator of performance for funds than other key factors.

As the covid-19 pandemic brought the private real estate world to a halt in March, 2017- to 2019-vintage funds effectively became crisis-year vintages. Although fully raised, they were generally in the earlier stages of deployment at the onset of the crisis.

For Meagan Nichols, global head of real assets at consulting firm Cambridge Associates, how well these recent vintages perform will depend largely on one factor. “If you think about the hardest-hit vintage funds that were raised in 07, 08, one of key differentiators in performance was how quickly they put out the capital and where they were weighted pre- or post-Lehman,” she says. “If more of their capital had been put out pre-Lehman, they had obviously bought at much higher valuations. Those that had been slower to deploy capital ended up doing better because they had more dry powder. They took longer to deploy that capital, but they did better.”

For this reason, the performance of recent vintage funds could vary significantly. “It’s not so much a question of when was capital raised and how broadly those vintages do, but rather how much dry powder did GPs have in mid-February and are going to have now in order to go out and take advantage of opportunities as they do start to arise,” Nichols says.

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