At Institutional Real Estate, Inc.’s 2019 Visions, Insights & Perspectives (VIP) Americas conference in Carlsbad, Calif., the panelists during the U.S. Capital Flow Trends with IREI: FundTracker discussion agreed that “if you are in the real estate sector, you should be allocating to debt,” especially at this point of the real estate cycle. Debt is a lower risk, and the beauty of it is that you can get short-term returns, the panelists said.
These days, people are investing in diverse asset portfolios and putting capital in different buckets, where in the past, investors put all their capital into one bucket. And although debt is not as popular and widely discussed as other strategies, it is important to incorporate in your asset portfolios.
An addition to the debt discussion was the open-end versus closed-end vehicles as it relates to debt funds. Most debt funds are closed-end. The panel asked, “Why”? Part of the challenge is that investors are reluctant to invest in open-end funds, and so investment managers structure funds to adhere to the customers. However, the positive thing about an open-end fund is that it allows the fund manager the time to solve any loan problems. Financial institutional don’t have the appetite to work through the stress, the panelists said, but open-ended funds give the fund sponsor the necessary time to figure out solutions to problems that they may face. The panelists noted that if you have the capital to work through a downturn, then you can work through it, but if you don’t, it will be a difficult time.
Lastly, the panelists discussed the “hot” sectors to invest in right now. They said core-plus in niche strategies that aren’t tied to the investment cycle are promising, which include medical office, senior housing, student housing, life science, data centers and healthcare. The panelists concluded that alternative asset classes are creating their own alternative investments within those, which will present new opportunities in the future.
