Real estate money managers are starting to investigate creating smaller open-end funds, said James G. Tod, partner at consulting firm KPMG, during a panel on Thursday at IMN’s 12th Annual Winter Forum on Real Estate Opportunity & Private Fund Investing Conference in Laguna Beach, Calif.
Currently, open-end funds are large — about $10 billion and more — due to the administrative costs, which become more onerous for smaller funds, Mr. Tod said.
Open-end real estate funds are like hedge funds because there is typically no fixed time period for the life of the fund, Mr. Tod said.
In interviews, managers at the conference who declined to be identified said the attraction of open-end funds is that it gives managers perpetual capital.
In another panel on commercial real estate financing, speakers said there are too many managers that are starting new real estate debt businesses.
There are too many new entrants, said panelist Steve Fried, principal of real estate debt manager Mesa West Capital.
“Debt is more popular because it’s hard to find good equity deals,” Mr. Fried said.
But there are a lot of new real estate debt managers or real estate money managers adding real estate debt businesses that have not been able to raise capital, said panelist Sujan Patel, managing director and co-head of investments at Northstar Realty Finance Corp.
Still, the real estate markets have not gotten frothy, with high prices and huge amounts of leverage, said panelist Bruce Batkin, president and CEO of Terra Capital Partners, a real estate debt manager.