Evening Brief – 02.16.24
Mood Swings
There is a prevailing sense of confidence among real estate managers, who are anticipated to largely maintain their asset allocations within the sector for 2024, despite the difficulties encountered the previous year, according to the second annual Crestbridge Alternative Managers’ Mood Index (CAMMI).
The CAMMI score was developed by Crestbridge, a private equity and real estate capital administrator, with the purpose of monitoring the intentions of asset managers regarding their allocations over the next 12 months.
CAMMI tracks allocation trends across private equity, real estate and private debt markets on a 0-100 scale. A score above 50 indicates an increase in allocations over the previous period, while a score below 50 signifies a drop in allocations — and the level of change increases as the score moves further away from 50.
The 2024 Global Allocation Trend report showed an overall CAMMI score of 42.37, down from 53.85 in March 2023. Paradoxically, 89% of participating asset managers stated they were completely or mostly satisfied with their performance, up from 84% a year ago.
Real estate and infrastructure fell to 42.85 from 50. Last year, the sector was pressured by interest rates and a general downward trend in asset prices, but the relatively minor dip suggests optimism among real estate managers, according to Crestbridge.
The firm observed that an increased emphasis on operational efficiency, regulation and compliance, and a lessened concern for talent management indicate that real estate managers are prioritizing operational savings over team expansion.
Crestbridge CEO Dean Hodcroft anticipates potential market reinvigoration on the horizon, as interest rates stabilize, and the forward interest rate curve shifts downward.
“Despite last year’s dual challenge of rising interest rates and pressure on real estate prices, the sector showed remarkable resilience,” said Hodcroft. “This new environment, coupled with valuation stresses, may create a more favorable leverage scenario, enticing buyers and helping the refinancing markets.
Hodcroft stated that real estate managers are discovering new opportunities in developing industries such as e-commerce logistics, adaptable office spaces, and life sciences facilities. “It’s this adaptability and resilience that will chart the course for real estate’s future.”
Approximately 40% of CAMMI participants are among the top-500 largest firms in the global fund management industry by assets under management. Most respondents (80%) have their most recent funds in Europe, with 25% in North America. The remaining respondents came from the rest of the world, with Asia being the only region not represented.