Institutional real estate investors in Canada and the United States are looking to their neighbors for cross-border property investment opportunities. Differences between the two markets can create different sets of opportunities. While Canadian investors may be attracted by opportunities created by distress in the U.S. property markets, U.S. investors will find a stronger economic recovery to their north.

One widely held belief of institutional investors is that co-investment from a manager serves to align the interests of the manager and the investor. This article presents some challenges to this belief.

While requiring manager co-investment in institutional real estate ventures may sometimes serve to align manager and investor interests, there are cases where it has negligible impact as well as cases in which its impact is counterproductive. From an institutional investor’s perspective, the challenge is to distinguish the cases where co-investment is a benefit from those where it is merely “alignment-candy” — or worse. It also means that LPs need to examine co-investment on a case-by-case basis and should not rely on simple quantitative or qualitative formulations such as “X percent of capital” or “meaningful co-investment.”

A few weeks ago, I received a book from a person who, like the character Voldemort from the Harry Potter series, must not be named. The book was Cyber Wars, and it was written by Richard Clarke, former White House National Coordinator for Security, Infrastructure Protection and Counter Terrorism, with help from Robert Knake, an international affairs fellow for the Council on Foreign Relations.