Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. Print
October 04, 2010 01:00 AM

Open-end funds now belles of the ball as investors return

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Investors that pulled back from real estate after losing close to half of their portfolios' value during the market downturn are returning to the asset class through what they consider a more liquid model: the open-end fund.

    The exit (or redemption) queues that accompanied the recent market meltdown, when investors sought to withdraw 25% or more of some open-end real estate funds' capital, are beginning to be replaced with entry queues.

    “Talking to the managers, we've found that most have eliminated their (redemption) queues,” said Sally Haskins, senior vice president, real assets in the Chicago office of Callan Associates Inc. “Most open-end funds had exit queues and these peaked in the first quarter 2009 ... Entry queues did not start until the second quarter (of 2010).”

    At their peak, the redemption requests totaled about $11 billion (total net asset value of the funds was $60 billion), according to data compiled by Callan. By the second quarter 2010, exit queues had dropped to around $3 billion.

    Callan officials began to notice some funds having lines of investors wanting to invest. By the second quarter, six funds had entry queues, Ms. Haskins said. (Third-quarter data are not yet available.)

    “The magnitude of the decline (in redemption requests) is stunning. By the third quarter we will see the numbers drop further.”

    At least one manager, New York-based J.P. Morgan Asset Management, says its open-end funds now have lines of investors trying to get in.

    “We've experienced a dramatic turnaround in client flows over the past year as investors recognized that real estate had become a strong relative value,” said Kevin Faxon, managing director and head of real estate, Americas, J.P. Morgan Asset Management in New York. “As a result, redemption queues that peaked in mid-2009 at more than $2.4 billion have disappeared — more than $2 billion in redemption requests were rescinded — and we are now working carefully to invest a sizable commitment queue.”

    Among the pension funds investing in open-end real estate funds:

    • The $12.1 billion State Universities Retirement System of Illinois, Champaign, made follow-on commitments of $50 million each to the UBS Trumbull Property Fund LP and the J.P. Morgan Strategic Property Fund., both open-end funds The system already had $105 million invested in the UBS fund and $120 million in the J.P. Morgan fund;

    • The $6.9 billion Montana Board of Investments, Helena, invested in four core open-end funds: $43 million in American Core Realty Fund LLC, $30 million in the J.P. Morgan fund, $20 million in the UBS fund and $20 million in TIAA-CREF Asset Management Core Property Fund LP;

    • The $10.1 billion Ohio Police & Fire Pension Fund, Columbus, invested $100 million in the UBS Trumbull Property Fund; and

    • The $10.2 billion Arkansas Teacher Retirement System, Little Rock, added $50 million each to its investments in the UBS and J.P. Morgan funds.

    Only a year earlier, pension systems were lining up to retrieve their money from some J.P. Morgan funds and the UBS Trumbull Property Fund. But then some investors had a change of heart.

    In March, for instance, the $9.7 billion Illinois State Board of Investment, Chicago, rescinded its redemption request to terminate the $103 million J.P. Morgan Strategic Property Fund.

    In October, the $9 billion Public School Teachers' Pension & Retirement Fund of Chicago rescinded its redemption requests to J.P. Morgan and UBS for all amounts except $25 million. At the same time, the system made a new investment in LaSalle Property Fund, a new open-end real estate fund LaSalle began raising last year.

    Partial redemption

    The Oregon Investment Council, which oversees the $51.5 billion Oregon Public Employees Retirement Fund, Salem, sought a partial redemption of its investment in RREEF America II as part of a rebalancing strategy, said James Sinks, spokesman.

    “It was the most liquid and best positioned to provide a rebalancing opportunity for the portfolio,” as dropping values caused the council's total portfolio to be overweight real estate, he said.

    Capital was returned, but the Oregon Investment Council withdrew its request as property values began to recover. The council's investment officials are not considering open-end funds for future real estate investments, Mr. Sinks said.

    Allen Smith, CEO of Prudential Real Estate Investors, Parsippany, N.J., said open-end funds are attractive to investors that get “a certain amount of comfort” because of “the perceived liquidity” they can supply.

    Many of the redemption queues were the result of investors' need for cash during the financial crisis, he said, rather than a vote of no-confidence in real estate, he and Callan's Ms. Haskins said.

    “If you think about where we were in the summer of 2009, we were just coming through the period where real estate was getting hit from the worst of the financial crisis,” Mr. Smith said. “There were a lot of people in crisis mode. They were working through liquidity issues.”

    Many of those liquidity issues now have abated, he said.

    “There's a calm in the market that did not exist 12 months ago.” He added, however: “There's still a healthy amount of uncertainty on what strategies make sense and what strategies can you execute.”

    Said Ms. Haskins: “People are being reasonably picky, investing in the highest quality managers, in the highest quality assets and in the highest quality investment process ... There have been concerns related to the type of assets and the debt levels in some of the funds.”

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Targeting millennials: Author, niece put his latest book to music
    Targeting millennials: Author, niece put his latest book to music
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    Infrastructure Debt Delivers Reliable Returns
    Sponsored Content: Infrastructure Debt Delivers Reliable Returns

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Middle market credit: We’re gonna need a bigger boat
    Alternative Credit: Differences and Opportunities in CLOs and Credit Risk Shari…
    Fixed Income is Attractive, but Beware of "Fake" Yield
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Biodiversity: why investors should care
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income