Executive Summary:
Real Assets Fundraising and Distributions Painted Different Pictures
- Real estate manager concentration led to outsized fundraising from fewer managers in 2023.
- Investors continued allocating to infrastructure, despite a slower fundraising environment.
- Natural resources fundraising remained muted, while higher commodity prices helped to monetize existing positions.
Real Assets Capital Flows Steadied While Private Markets Grew in 2023
Looking atreal assetscapital flows, we see that the percentage of private markets occupied by these asset classes, on balance, remained relatively steady from 2020 to 2023. However, the size of the private markets grew substantially over this same period to $14.4 billion – a gain of over 40%.
Unfortunately, it is well known that this ‘larger pie’ did not translate into a stronger fundraising environment, at least in 2023. Instead, fundraising decreased substantially within infrastructure, natural resources and real estate, down 40% to 62% and 57%, respectively.
Surprised? Neither were we. But as we looked a little closer, a few less obvious data points emerged.
Manager Concentration and Investor Exposures
First, fundraising was much more highly concentrated across a smaller number of managers than in years past. Looking at the 10-year period of 2013 to 2022, the top five real estate managers attracted about 23% of the capital on average annually. For infrastructure, it was 36% on average annually. But in stark contrast, these figures nearly doubled in 2023, jumping to 51% for real estate and 66% for infrastructure. (Unsurprisingly, the figure was 97% for natural resources, a product of a smaller universe.)
Real Estate
USD in Billions
Infrastructure
USD in Billions
Natural Resources
USD in Billions
Second, a look at capital flows shows that the slower fundraising environment didn’t necessarily translate into a broad reduction in investor exposures. It is well known that transaction volume slowed in 2023 and, as a corollary, so did realizations. In infrastructure, this is reflected in distributions which were below their long-term average. However, contributions as a percentage of unfunded commitments remained above average (more than 40%). Meanwhile, investor exposure (net asset value, or NAV) continued to increase, as did unfunded commitments. Translation? Even though fundraising slowed, investors continued building infrastructure allocations.
Infrastructure
Capital deployment remained strong in 2023
Infrastructure
USD in Billions
Real estate, where transaction volumes were off nearly 60%, saw annual distributions down to lows not experienced since the GFC. At the same time, contributions were approximately 25% lower than their historical averages. However, while NAVs remained relatively flat, unfunded commitments came down. Maybe this is not as surprising given that real estate exposure, as a percentage of private markets, fell to 10% in 2023 from 11% in 2020.
Real Estate
Transaction volume was down almost 60% in 2023 resulting in low capital inflows and outflows
Real Estate
USD in Billions
Meanwhile in natural resources, where fundraising has been muted and unfunded, commitments have come down, along with NAV. On the other hand, distributions continued to be higher than historical averages, partially due to higher commodity prices, which allowed for the monetization of existing positions. But unfortunately, most signs point to a pullback from the asset class.
Natural Resources
Natural Resources
USD in Billions
We provide further insights and observationsacross real estate in our 2024 Real Assets Market Overview. Please complete the form below to receive an emailed copy of the report.
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As of June 5, 2024
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