Assets under management of the largest real estate managers continued along a path of steady growth, pushed by investors search for steady income, with worldwide assets up 8.7% to $1.32 trillion for the year ended June 30, compared with 5.5% growth a year earlier.
There were reversals of fortunes in a few of the categories tracked by Pensions & Investments' annual survey of real estate managers. Worldwide real estate investment trust assets managed by the largest managers dropped by 10.7% to $416.3 billion after last year's growth spurt of 15.4%. Hybrid debt was the only other sector to lose assets in the 12 months ended June 30, although from a lower base, down 13% to $9 billion compared to a 14.5% increase in last year's report.
Not all the reversals were negative. Worldwide timber assets were up 1.3% to $31.8 billion, compared to a 2.4% drop in the year-earlier period. Worldwide farmland assets grew by 10.2% to $18.7 billion, compared to a 12% drop in worldwide farmland assets a year ago.
MetLife Investment Management lead the list of managers of worldwide real estate with assets up 4.7% to $105.8 billion.
"Our growth in AUM reflects an increasing number of customers across the commercial real estate strategies we offer, including our real estate debt and real estate equity platforms," said Robert Merck, senior managing director and global head of real estate and agriculture at MetLife Investment Management. "Overall growth in our platform has been driven by new investments, and while we continue to attract new customers and assets, the denominator effect has moderated our overall rate of growth."
The denominator effect occurs when a decline in a pension fund's total assets causes target allocations to illiquid alternative investments to rise to or above their targets, curtailing their ability to make new commitments.
Real estate equity assets managed for U.S. tax-exempt clients increased 2.1% to $416.6 billion, continuing the steady climb since 2010. Last year, real estate U.S. tax-exempt assets grew nearly 5%.