Interval fund structures have been widely adopted by the institutional management sector, including for commercial real estate.
Real estate interval funds are working to regain the momentum they were enjoying pre-pandemic. Steady inflows of new capital around $2.2 billion per year between 2016 and 2018 took a leap forward to $3.5 billion in 2019. Yet, as with much of the rest of the real estate investment universe, 2020 brought a drop in fundraising and negative net inflows due to a surge in redemption requests from investors.
According to data from Robert A. Stanger & Co., redemptions for 2020 totaled more than $2 billion, while fundraising slowed to $1.8 billion, resulting in net inflows of $278 million. Many in the sector are hoping that 2020 will end up being only a painful hiccup in an otherwise strong market for real estate interval funds. Interval funds are not able to gate redemption requests, and most funds allow up to 5 percent of shares to be redeemed per quarte
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The vast majority of new capital is going to non-traded REITs operated by the Blackstone Group.
Capital flows into non-traded REITs appear poised to leap higher following what has been a rollercoaster year of fundraising.
The latest industry research from Robert A. Stanger & Co. points to a strong rally in fundraising in December and January that is setting the stage for continued flows throughout 2021. Although fundraising ended the year 8.5 percent below that of 2019 at $10.8 billion, Stanger is forecasting strong momentum that could lift fundraising to $15 billion in 2021.
Fundraising took a hit last spring and summer due to uncertainty on how the pandemic might impact real estate values. Real estate values generally lag broader moves in the economy. In addition, the way that one popular category of non-traded REITs work, NAV (net asset value) REITs, is that shareholders are admitted on a monthly basis with an NAV that is usually derived from the prior month’s valuat
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