Real estate equity managers overcame challenging fundamentals and high real estate prices to gain the most assets under management last year among firms investing in alternative investments other than hedge funds, with internally managed U.S. institutional tax-exempt assets rising by $24.5 billion, or 15%, from 2002.
Real estate equity assets under internal management for U.S. institutional tax-exempt clients rose to $191.6 billion as of year-end 2003, from $167 billion the year before.
High-yield bond managers also enjoyed a boom year, with assets rising $21 billion, or 24%, to $109 billion, according to Pensions & Investments' annual survey of money managers. (All figures cited in this story, unless otherwise specified, reflect U.S. institutional tax-exempt assets under internal management as of year-end 2003.)
Assets under management in many of the other alternative asset classes either stayed the same or increased in the current report. Real estate investment trust assets were up 38% to $43.6 billion from $31.4 billion. TIAA-CREF and Deutsche Asset Management, both of New York, once again held the top two spots, with $7 billion and $5.6 billion, respectively.
Private securities — private equity and privately placed bonds — rose 12% to a combined $67.2 billion, from $59.8 billion. Privately placed bonds jumped 18% to $41 billion, from $35 billion; private equity rose 4.5% to $25.8 billion, from $24.7 billion. However, venture capital assets under management declined 12% to $16.2 billion from $18.5 billion, among respondents to the P&I survey.
The leading real estate equity managers based on internally managed U.S. institutional tax-exempt assets remained much the same as in 2002, with the exception of Morgan Stanley Real Estate, New York, which took the top slot with $16.9 billion in U.S. tax-exempt assets, partly through its acquisition of Lend Lease Real Estate's equity assets last year. Morgan Stanley Real Estate received $10 billion in total assets from its Nov. 4 purchase of Lend Lease, said Andrew Walton, MSRE spokesman. (Lend Lease reported $11.3 billion in real estate equity in the year-end 2002 survey, ranking it second for real estate equity assets; Morgan Stanley Real Estate did not participate in that survey.)