Investors embrace riskier strategies to capture covid opportunities

Global institutions targeted opportunistic funds and broke into new strategies in 2020, but stayed closer to their home markets.

Investors have adopted a risk-on approach to their real estate allocations during the pandemic, according to a survey of 212 global institutions.

https://infogram.com/2020-allocations-monitor-strategy-1hnp27mmkgzln2g

Hoping to capitalize on distressed pricing and catch the bottom of the market, 72 percent of respondents favored opportunistic strategies this year, according the 2020 Allocations Monitor compiled by capital advisory firm Hodes Weill & Associates and the Cornell University Baker Program in Real Estate, up from 69 percent last year. Meanwhile, interest in core and value-add strategies fell to five-year lows of 62 and 84 percent, respectively.

Along with this renewed preference for higher-risk strategies, investors were also optimistic about the return prospects for their real estate portfolios, with respondents registering a 5.9 on the 10-point conviction index, the highest average since the Allocations Monitor began in 2013. Similarly, investors are anticipating their greatest collective exposure to the sector to date, with a weighted average allocation of 10.6 percent.

“We’re seeing sentiment rise a bit and a general view that the next several years will be good vintages for deploying capital,” Douglas Weill, founder and co-managing partner of Hodes Weill, told PERE. “Coupled with that, institutions seem to be shifting away from lower returning strategies, core and value-add, to higher return opportunistic with a special focus on distress.”

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